Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms
International Journal of Accounting, Finance and Risk Management
Volume 5, Issue 3, September 2020, Pages: 141-148
Received: Jun. 4, 2020;
Accepted: Jun. 20, 2020;
Published: Jul. 4, 2020
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Ibrahim Mallam Fali, Department of Accounting, University of Calabar, Calabar, Nigeria
Terzungwe Nyor, Department of Accounting and Management, Nigerian Defence Academy, Kaduna, Nigeria
Lateef Olumide Mustapha, Department of Accounting and Management, Nigerian Defence Academy, Kaduna, Nigeria
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.
Ibrahim Mallam Fali,
Lateef Olumide Mustapha,
Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms, International Journal of Accounting, Finance and Risk Management.
Vol. 5, No. 3,
2020, pp. 141-148.
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