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CEO Pay/Performance in the Insurance Industry

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  • Alex H. Wilson
  • Eric Higgins

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.

Suggested Citation

  • Alex H. Wilson & Eric Higgins, 2001. "CEO Pay/Performance in the Insurance Industry," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 24(1/2), pages 1-16.
    • Handle: RePEc:wri:journl:v:24:y:2001:i:1:p:1-16
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    File URL: http://www.insuranceissues.org/PDFs/241WH.pdf
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