Nigerian Journal of Banking and Financial Issues (NJBFI)

RISK MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF NON-LIFE BUSINESS IN NIGERIA

Abstract

This study examined the influence of risk management practices (actuarial, underwriting, and investment) on the financial performance of the non-life insurance companies in Nigeria.Anexpost facto research design was employed, utilizing a census sampling taking into cognizance all forty-one licensed non-life insurance companies in Nigeria as of January 2023. Secondary data were collected from the companies’ financial reports covering twenty-year period of 2008-2023. The data obtained was analyzed using both regression and correlation analysis. The result of the study revealed that underwriting practice has significant positive effect on profitability of non-life insurance companies in Nigeria. Also, the study revealed that underwriting, actuarial, and investment practices have a joint significant effect on the profitability of non-life insurance companies. The findings implied that non-life insurance companies in Nigeria should refine their underwriting processes, adopt actuarial models, rather than the “the rule of the thumb” and focus more on investment strategies to mitigate potential and catastrophic risks. These on a long run could help non-life insurance companies capitalize on opportunities. This study is only limited to non-life, thereby neglecting the life insurance companies. The study proves the paradigm shift of over reliance of reinsurance as a main risk management technique for insurance companies. The study shows the importance of risk management practices on the performance of non-life insurance companies in Nigeria.