RISK MANAGEMENT, UNDERWRITING CAPACITY AND THE PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA

ABSTRACT

The impact of risk management and underwriting capacity on the performance of insurance companies in Nigeria for the period 2001 to 2022 was the focus of this study. The specific objectives of the study were to examine whether claim settlement risk (CLAIMR), premium risk (PREMR), penetration risk (PENR), investment risk (INVESTR) and interest rate risk (INTRR) have significant relationship with insurance companies performance in Nigeria. The Autoregressive Distributed Lags (ARDL) technique was employed for the analysis of data. The results obtained indicated that the lagged value of insurance performance (ROA(-1) significantly impact performance than the current value. claim settlement risk (CLAIMR) and investment risk (INVESTR) have significant negative impact on performance, premium risk (PREMR) and interest rate risk (INTRR) has significant positive impact on insurance companies performance; while penetration risk does not have any significant impact on insurance companies performance in Nigeria. The study conclude that these hypothesized variables, claim settlement risk, investment risk, premium risk and interest rate risk are potent factors for determining the level of performance of insurance companies in Nigeria in the long run. The study recommends among others that, policy makers in the insurance industry should as a policy reform tool mandate the insurance sector not to only set aside good percentage of their annual profit before interest and taxes specifically to finance the private sector and at the same time lower the collaterals for assessing such loans at a very lower rate. This will help strengthen the overall funds available to the companies to be able to engage on productive investment and in turn boost the overall performance of insurance companies.