This research paper examined the simultaneous relationship between sustainability risk management (SRM) as an extension of Enterprise Risk Management (ERM) and Palestinian insurance firms’ profitability, for the period spanning 2007Q1 to 2018Q4, by applying the panel dynamic (Generalized Method of Moments) GMM model. The literature was expanded by providing a comprehensive understanding of determining the pillars of ERM with the use of the factor analysis principle component method. The findings revealed that the firm’s profitability positively corresponded to ERM1 implementation, which represents “management efficiency”. In contrast, it shows negative correspondence to ERM2 implementation, which represents “control and ownership”. Furthermore, there were slightly negative signs from managing the use of leverage and they were conservative in terms of loss reserves. The challenges of firms’ profitability have negatively corresponded to emerging sustainability risks, such as political stability, that cause premiums written to show weak signs of excessive choice of risk or prices that are not met carefully. Interestingly, there is a positive relationship in the interaction between ERM2 implementation during the crisis period on insurance firms’ profitability. There is a robust causal relationship from ERM to the profitability (either positive or negative). The reverse causality is also significant but to a lesser extent. Thus, the study recommends alignment more coherent with the implication of ERM as holistic risk according to the market characteristic towards the environmental perils leads to sustainable development and its segments to maintain the longer term of survival in the firms’ performance.