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CEO Pay/Performance in the Insurance Industry

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  • Alex H. Wilson
  • Eric Higgins
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    Abstract

    This study compares CEO compensation practices and sensitivities with a control group of non-insurance service companies. This study extends the current literature in three ways. First, the sensitivity of CEO compensation is measured using three different measures of firm performance: size, accounting earnings, and market return. Second, the components of CEO compensation are examined individually. Third, compensation practices across different categories of insurers are examined. Results show that CEOs of insurance firms have compensation packages that are similar to those of non-insurers. However, CEOs of property/casualty and insurance brokerage firms have significantly lower salaries and option compensation than those of non-insurance firms. Total compensation in the insurance industry is sensitive to both market returns and firm size but compensation in non-insurance companies is sensitive only to market returns. Additionally, significant differences in the sensitivities of the individual components of compensation exist between insurance and noninsurance firms.

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    File URL: http://www.insuranceissues.org/PDFs/241WH.pdf
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    Bibliographic Info

    Article provided by Western Risk and Insurance Association in its journal Journal of Insurance Issues.

    Volume (Year): 24 (2001)
    Issue (Month): 1/2 ()
    Pages: 1-16

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    Handle: RePEc:wri:journl:v:24:y:2001:i:1:p:1-16

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