Examining the impact of intellectual capital on underwriting risk of insurance companies in Pakistan: static and dynamic panel regression

Abstract

Purpose This study aims to examine the impact of intellectual capital on the underwriting risk of insurance companies in Pakistan. Design/methodology/approach The study used a quantitative research approach and a longitudinal research design, gathering data from 23 insurance companies listed on the Pakistan stock exchange from 2010 to 2022. The value-added intellectual coefficient (VAIC) was used to measure intellectual capital (IC), and unbalanced panel data were analyzed using static and dynamic regression analyses. Findings The findings demonstrate a significant association between intellectual capital and underwriting risk in insurance companies in Pakistan. Specific components of intellectual capital, such as human capital efficiency (HCE), structural capital efficiency (SCE) and capital employed efficiency (CEE), have a strong negative impact on underwriting risk. Control variables like return on assets, insurer size and leverage also showed significant relationships with underwriting risk. Originality/value This research provides new insights into the theoretical understanding of the insurance industry by establishing a direct link between intellectual capital and underwriting risk in the context of Pakistan. It suggests that by improving aspects of intellectual capital, specifically HCE, SCE and CEE, policymakers and managers can reduce underwriting risk.