The performance of ESG dimensions has increasingly been recognized as a key determinant of financial stability, particularly for institutions exposed to sustainability and governance challenges. However, empirical evidence on the dynamic interaction between ESG performance and insurance stability remains limited, especially in emerging markets. This study contributes to filling this gap by examining the dynamic relationship between ESG performance and insurance financial stability in the MENAT region using a Panel Vector Autoregressive (PVAR) framework, which captures endogenous interactions and feedback effects among the variables. Drawing on a panel of 31 insurance companies operating across seven MENAT countries (Bahrain, Kuwait, Morocco, Qatar, Saudi Arabia, Turkey and the United Arab Emirates) from 2017 to 2024, the results reveal significant bidirectional linkages between ESG performance and insurance stability. Specifically, ESG performance appears negatively associated with insurance stability, whereas insurance stability positively influences ESG performance. However, the three ESG pillars exhibit unidirectional causality with insurance stability. These findings underscore the complex nature of ESG–stability dynamics in the MENAT insurance sector and suggest that efforts to enhance ESG practices should be accompanied by strengthened risk-management frameworks. The study advances literature by providing new evidence from the MENAT region and by highlighting the differentiated effects of aggregate and disaggregated ESG factors on financial stability.
Chafai et al. (Tue,) studied this question.
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