This study explores the effects of reinsurance arrangements on financial performance of insurance companies in Nigeria. It is worthy of note that insurance companies are exposed to a harsh environment once engaged in high-level risk taking that have the potentials to weaken their financial ability to settle claims and mostly threaten their survival. Hence, it is a known fact that reinsurance arrangement can provide some level of financial protections for insurers against the risk of their own default.
In particular, the study assessed the effect of reinsurance utilization on underwriting profit, gross premium incomes and gross claim payments of insurance companies in Nigeria. Secondary data was collected from 32 licensed insurance firms who have reinsurance coverage out of the 42 registered insurance companies in Nigeria. The study used expo facto research design and data were gathered from published annual reports of NAICOM, insurers' annual financial reports and NIA digests from 2009-2018.Both descriptive and inferential statistics of OLS were employed in analyzing the data.
Table of Contents
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Question
1.5 Hypotheses
1.6 Significant of the Study
1.7 Scope/Limitation of the Study
1.8 Operational Definition of Terms
CHAPTER TWO
LITERATURE REVIEWS
2.0 Introduction
2.1. Conceptual Reviews
2.2 Theoretical Reviews
2.3 Empirical Reviews
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Population
3.4 Sample
3.5 Sampling Technique
3.6 Types and Source of Data
3.7 Variable Operationalization
3.8 Model Specification
3.9 Method of Analysis
3.10 Econometrics Issues
CHAPTER FOUR
4.0 Introduction
4.1 Data Presentation
4.2 Descriptive Data Analysis
4.3 Test of Hypotheses
4.4 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
5.1 Summary
5.2 Conclusion
5.3 Recommendations
Research Objectives and Focus
This study aims to investigate the impact of reinsurance arrangements on the financial performance of insurance companies in Nigeria over the period from 2009 to 2018, specifically examining how reinsurance utilization affects core performance indicators such as underwriting profits, gross premium income, and gross claim payments.
- Analysis of the relationship between reinsurance utilization and underwriting profitability.
- Examination of the effect of reinsurance on gross premium income generation.
- Assessment of the role of reinsurance in managing gross claim payments.
- Evaluation of financial stability indicators within the Nigerian insurance sector.
- Contribution of empirical evidence to the discourse on risk management and firm performance.
Excerpt from the Book
1.1 Background of the Study
Insurance is defined as a contract whereby one person, called the insurer, undertakes to make good for the loss of another, called the insured, on payment of a specific sum of money, called premium, to him on the happening of a specified event. Thus, insurance is a cooperative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against the risk (Vaughan, 2008). Reinsurance on the other hand is a strategy through which one insurance firm (the “reinsurer” or “the ceding company”) enters into a contractual agreement with another insurance firm (the “reinsured”) to indemnify it against part or the entire loss that the latter may sustain under the policies which it has issued to its clients (Pitselis, 2008). As a consideration, the ceding company pays reinsurance premiums to the reinsurer.
Like insurance, the aim of reinsurance is to spread risk. Hence, insurance companies spread their risks and are able to protect themselves against extraordinary or unforeseen losses through reinsurance. For instance, in case of a catastrophic fire at an industrial enterprise the industrial enterprise’s claims may financially devastate an insurance company that covered the risk. According to Munich (2010: 34), “reinsurance enables all insurers to manage their financial burdens to the extent that none is faced with a financial burden that it is not able to pay”.
Reinsurance has been identified as an important component of the insurance industry (International Association of Insurance Supervisors ‘IAIS’, 2012). Furthermore, IAIS has stated that reinsurers reduce volatility of earnings of the insurance companies by absorbing losses that the insurance Companies do not retain on their book or have transferred. The reinsurance business is similar to that of insurance companies, because they enter into contracts with insurance companies to indemnify them against future claims that the insurance companies may have against the policies to which they pay premiums today.
Summary of Chapters
CHAPTER ONE: Provides the foundational background, problem statement, research objectives, and hypotheses concerning the link between reinsurance and insurance firm performance in Nigeria.
CHAPTER TWO: Reviews the conceptual, theoretical, and empirical literature, covering key topics such as reinsurance mechanisms, financial performance indicators, and relevant financial theories.
CHAPTER THREE: Outlines the research methodology, including the expo facto research design, population, sampling of 32 firms, data sources, and the model specification used for regression analysis.
CHAPTER FOUR: Presents the collected secondary data, performs descriptive and inferential analysis, and discusses the findings in relation to the stated hypotheses.
CHAPTER FIVE: Summarizes the study findings, draws logical conclusions, and provides strategic recommendations for stakeholders and regulatory bodies like NAICOM.
Keywords
Reinsurance, Financial Performance, Insurance Companies, Nigeria, Underwriting Profit, Gross Premium Income, Gross Claim Payments, Risk Management, Solvency, Ratio of Ceded Reinsurance, Insurance Industry, Policyholders, Capital Structure, Insolvency, NAICOM.
Frequently Asked Questions
What is the core focus of this research project?
The research explores the impact of reinsurance arrangements on the financial performance of licensed insurance companies in Nigeria between 2009 and 2018.
What are the primary financial performance indicators analyzed?
The study evaluates three main indicators: underwriting profit, gross premium income, and gross claim payments.
What is the central research question of this study?
The study seeks to determine whether reinsurance utilization significantly influences the financial performance of Nigerian insurance firms and their ability to settle claims.
Which methodology does the author apply?
The study utilizes an expo facto research design and employs descriptive statistics alongside the Ordinary Least Squares (OLS) inferential regression technique.
What does the literature review cover?
It covers conceptual reviews, theoretical frameworks like Team Production Theory and Collective Risk Theory, and empirical reviews of previous studies on reinsurance.
What defines the study's scope?
The research is limited to data from 32 selected registered insurance companies in Nigeria as reported by NAICOM from 2009 to 2018.
What is the significance of the "Ratio of Ceded Reinsurance" in this work?
The Ratio of Ceded Reinsurance (RCR) serves as the primary independent variable measuring the extent of reinsurance utilization within the sampled insurance firms.
How does reinsurance affect the financial burden of an insurer?
According to the study, reinsurance allows insurers to transfer portions of their risk portfolios to reinsurers, thereby reducing volatility and preventing financial devastation from catastrophic losses.
- Citation du texte
- Abasiama James (Auteur), 2021, Reinsurance and the Financial Performance of Insurance Companies in Nigeria, Munich, GRIN Verlag, https://www.grin.com/document/1021706
