Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms

Ibrahim Mallam Fali; Terzungwe Nyor; Lateef Olumide Mustapha

doi:doi:10.11648/j.ijafrm.20200503.13

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Insurance Specific Risk and Profitability: Evidence from Nigerian Insurance Firms

Ibrahim Mallam Fali, Terzungwe Nyor, Lateef Olumide Mustapha

Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 3)

Received: 4 June 2020 Accepted: 20 June 2020 Published: 4 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.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 3)
DOI	10.11648/j.ijafrm.20200503.13
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), 2020. Published by Science Publishing Group

Keywords

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

References

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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://article.sciencepublishinggroup.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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Author Information

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

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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

Copy | Download

@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://article.sciencepublishinggroup.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  -

Copy | Download