Analysis of the Contributions of Capital Adequacy on the Profitability of Insurance Companies in Nigeria

Abstract

Capital adequacy is crucial for the stability and good performance of insurance companies in Nigeria. This study analyses the contributions of capital adequacy to the profitability of insurance companies in Nigeria using 15-year time series data. An ex-post facto Research Design was employed, using 15-year time series data from selected insurance companies in Nigeria. Capital adequacy was conceptualised based on the profitability of the selected companies, using the Return on Assets (ROA). The finding shows that the profitability of insurance companies in Nigeria is influenced positively by their capital adequacy. Results show that well-capitalized insurers are better equipped to withstand economic downturns and catastrophic events, leading to sustained profitability. These insurers outperform their peers in profitability, generating better returns, increasing turnover, and fulfilling shareholders' obligations.