RISK MANAGEMENT IN INSURANCE: THE CONCEPT OF RISK POOLING

Abstract

This study investigates the impact of risk pooling on insurance firms financial stability in Nigeria applying the panel least square (PLS) technique using a panel data from 2012 to 2022.  Financial stability (FINSTA) is the dependent variable and was proxy for insurance firm performance while loss ratio (LOSR) and premium growth (PRGR) were proxies for risk pooling. A major finding is that the two measure of risk pooling (loss ratio (LOSR) and premium growth (PRGR) has no significant effect on the financial stability of insurance firms in Nigeria. The study recommends that regulators should come up with policies that will ensure insurance firms adopt appropriate risk pooling strategies to enhance their financial stability. Also, directors and managers of insurance firms should put in place proper risk management strategies to control loss ratio in order to enhance their financial stability. Furthermore, Insurance firms should redesign strategies to grow their premium since it has no influence on their financial stability.