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Abstract

This study examines the impact of organizational structure and board composition on risk taking in the U.S. property casualty insurance industry, addressing different risk-taking behaviors from different perspectives. The risk-taking measures include total risk, underwriting risk, investment risk, and leverage risk. The evidence shows that mutual insurers have lower total risk, underwriting risk, and investment risk than stock insurers. In terms of board composition variables, we find that some board composition variables not only have impact on risk-taking behaviors but also affect different risk measures differently. Thus, using different risk measures is better than using one risk measure to assess risk-taking behavior. Finally, we conclude that an insurer can control its total risk through management of underwriting, investment, and leverage risks that determine an insurer's risk profile.