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ABSTRACT
This study examined the effect of monetary policy on insurance sector development in Nigeria spanning periods from 1995 to 2022 based on the accessibility of data. Five hypotheses were raised and evaluated using the fully modified ordinary least squares (FMOLS) estimator. Findings from the study indicate that monetary policy rate does not significantly affect insurance sector development in Nigeria, cash reserve ratio plays a significant role on insurance sector development in Nigeria and that liquidity ratio does not significantly contribute to insurance sector development in Nigeria. Based on this findings the following recommendations were made; policymakers should consider developing more direct channels of communication and collaboration with insurance sector stakeholders to ensure that monetary policy adjustments are more closely aligned with the sector's needs and growth objectives thus bridging the gap between policy rate adjustments and sectoral growth, Policymakers should also consider recalibrating the cash reserve ratio to optimize its impact on the insurance sector. This might involve lowering the ratio to free up more funds for banks to invest in insurance products or to lend to insurance companies, thereby boosting sectoral growth. However, this must be done cautiously to maintain overall financial stability and finally, regulatory authorities should review the existing liquidity ratio requirements with a view to adjusting them in a way that supports greater investment in the insurance sector.
