RISK MANAGEMENT AND FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA

ABSTRACT

This study focuses on the effect of risk management practices adopted by Nigerian insurance companies on the financial performance of these companies. An exploratory research design was used for the study, with the target population being all registered insurance companies in Nigeria. The study used both primary and secondary data. Primary data was collected through questionnaires with 44 insurance companies giving a response. Secondary data was collected by use of desk search techniques from published reports as well as data from financial statements maintained by the insurance companies for a period of five years from 2016 to 2020. Content analysis was used to analyse qualitative data while the quantitative data was analysed using SPSS. Regression analysis was also used in the study. The study established that a majority of insurance companies in Nigeria had adopted risk management practices in their operations and that this had a strong effect on their financial performance. Risk identification was found to be the most significant in influencing financial performance, followed by risk mitigation, risk management program implementation & monitoring and risk assessment & measurement respectively. This study concludes that there is a positive relationship between the adoption of risk management practices and the financial performance of insurance companies in Nigeria. The study recommends that insurance companies in Nigeria should adopt a multifaceted approach to risk management in order to derive greater benefits from their risk management efforts. Further, Nigerian insurance companies should follow current international leading practice by adopting Enterprise Risk Management (ERM) which incorporates other insurance risk quantification models. This will ensure that the companies remain afloat during such times of strict regulatory regimes such as solvency 11 and Basel