International Journal of Accounting, Finance and Risk Management

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Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms

Received: 04 June 2020    Accepted: 20 June 2020    Published: 04 July 2020
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Abstract

Insurance firms assume different types of business-specific risks that affect financial operations. The study therefore investigates the effect of these insurance specific risks on profitability in Nigeria over the 10-year period (2009-2018) with a sample size of 19 firms. Three variables, such as Re-insurance, Technical Provisions and Underwriting Risks, have been used as a measure of insurance specific risk for independent variables. The net profit margin was used as a measure of profitability for the dependent variable. The study is based on the Ex-Post Facto Research Design, which uses data already collected for the study. The study used secondary data from their annual reports. The results of the fixed effect regression model showed that the technical provision and the underwriting ricks had a negative and significant impact on profitability, while the re-insurance risk had a negative and insignificant impact on profitability. The study concludes that an increase in technical provision and risk underwriting will lead to a poor profitability of the insurance companies listed in Nigeria. The study recommends that insurance companies in Nigeria should make sufficient provision for outstanding claims by conducting an adequate assessment of their liabilities and also taking into account past experience to develop a comprehensive procedure for effectively monitoring and controlling their outstanding claims.

DOI 10.11648/j.ijafrm.20200503.13
Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 3, September 2020)
Page(s) 141-148
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Profitability, Re-insurance Risk, Technical Provision Risk and Underwriting Risk

References
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Author Information
  • Department of Accounting, University of Calabar, Calabar, Nigeria

  • Department of Accounting and Management, Nigerian Defence Academy, Kaduna, Nigeria

  • Department of Accounting and Management, Nigerian Defence Academy, Kaduna, Nigeria

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  • APA Style

    Ibrahim Mallam Fali, Terzungwe Nyor, Lateef Olumide Mustapha. (2020). Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms. International Journal of Accounting, Finance and Risk Management, 5(3), 141-148. https://doi.org/10.11648/j.ijafrm.20200503.13

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    ACS Style

    Ibrahim Mallam Fali; Terzungwe Nyor; Lateef Olumide Mustapha. Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms. Int. J. Account. Finance Risk Manag. 2020, 5(3), 141-148. doi: 10.11648/j.ijafrm.20200503.13

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    AMA Style

    Ibrahim Mallam Fali, Terzungwe Nyor, Lateef Olumide Mustapha. Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms. Int J Account Finance Risk Manag. 2020;5(3):141-148. doi: 10.11648/j.ijafrm.20200503.13

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  • @article{10.11648/j.ijafrm.20200503.13,
      author = {Ibrahim Mallam Fali and Terzungwe Nyor and Lateef Olumide Mustapha},
      title = {Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {5},
      number = {3},
      pages = {141-148},
      doi = {10.11648/j.ijafrm.20200503.13},
      url = {https://doi.org/10.11648/j.ijafrm.20200503.13},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijafrm.20200503.13},
      abstract = {Insurance firms assume different types of business-specific risks that affect financial operations. The study therefore investigates the effect of these insurance specific risks on profitability in Nigeria over the 10-year period (2009-2018) with a sample size of 19 firms. Three variables, such as Re-insurance, Technical Provisions and Underwriting Risks, have been used as a measure of insurance specific risk for independent variables. The net profit margin was used as a measure of profitability for the dependent variable. The study is based on the Ex-Post Facto Research Design, which uses data already collected for the study. The study used secondary data from their annual reports. The results of the fixed effect regression model showed that the technical provision and the underwriting ricks had a negative and significant impact on profitability, while the re-insurance risk had a negative and insignificant impact on profitability. The study concludes that an increase in technical provision and risk underwriting will lead to a poor profitability of the insurance companies listed in Nigeria. The study recommends that insurance companies in Nigeria should make sufficient provision for outstanding claims by conducting an adequate assessment of their liabilities and also taking into account past experience to develop a comprehensive procedure for effectively monitoring and controlling their outstanding claims.},
     year = {2020}
    }
    

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  • TY  - JOUR
    T1  - Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms
    AU  - Ibrahim Mallam Fali
    AU  - Terzungwe Nyor
    AU  - Lateef Olumide Mustapha
    Y1  - 2020/07/04
    PY  - 2020
    N1  - https://doi.org/10.11648/j.ijafrm.20200503.13
    DO  - 10.11648/j.ijafrm.20200503.13
    T2  - International Journal of Accounting, Finance and Risk Management
    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
    SP  - 141
    EP  - 148
    PB  - Science Publishing Group
    SN  - 2578-9376
    UR  - https://doi.org/10.11648/j.ijafrm.20200503.13
    AB  - Insurance firms assume different types of business-specific risks that affect financial operations. The study therefore investigates the effect of these insurance specific risks on profitability in Nigeria over the 10-year period (2009-2018) with a sample size of 19 firms. Three variables, such as Re-insurance, Technical Provisions and Underwriting Risks, have been used as a measure of insurance specific risk for independent variables. The net profit margin was used as a measure of profitability for the dependent variable. The study is based on the Ex-Post Facto Research Design, which uses data already collected for the study. The study used secondary data from their annual reports. The results of the fixed effect regression model showed that the technical provision and the underwriting ricks had a negative and significant impact on profitability, while the re-insurance risk had a negative and insignificant impact on profitability. The study concludes that an increase in technical provision and risk underwriting will lead to a poor profitability of the insurance companies listed in Nigeria. The study recommends that insurance companies in Nigeria should make sufficient provision for outstanding claims by conducting an adequate assessment of their liabilities and also taking into account past experience to develop a comprehensive procedure for effectively monitoring and controlling their outstanding claims.
    VL  - 5
    IS  - 3
    ER  - 

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