Is the risk management committee only a procedural compliance? An insight into managing risk taking among insurance companies in Malaysia

Purpose--The purpose of this paper is to identify the relationships between risk management committee characteristics and risk taking of the Malaysia's insurance companies, from 2003-2011. The paper aims to examine three identified characteristics of a risk management committee, namely, size, independence, and number of meetings. Design/methodology/approach--The sample comprises 329 observations throughout the nine years' time frame until 2011. Pearson's correlation, pooled ordinary least squares regression, and panel regression model are used in this study. Sensitivity testing with an alternative measure of underwriting risk is also performed. Findings--Out of the three characteristics, size and committee independence appear to be negatively associated with underwriting risk. Meanwhile, the frequency of risk management committee meetings is insignificant in this study. Research limitations/implications--The sample of this study is limited to the Malaysia's insurance sector only. Originality/value--A risk management committee is an influencing force for risk oversight and the internal control system. The empirical evidence enriches the understanding of corporate governance in the context of the role of a risk management committee. Keywords Malaysia, Insurance companies, Risk management, Committees, Risk management committees, Audit committees, Underwriting risk Paper type Research paper
Introduction Financial crisis and unexpected collapse of many corporations and banks in the US have resulted in relentless consequences, including reduced economic activity, loss of public confidence, and unstable financial [...]