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International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue IV, April 2022 | ISSN 2454–6186

Impact of Reinsurance Underwriting Operations on Assets Management of Insurance Companies in Nigeria

Emmanuel Opeyemi Oladunni1, Ann Uzoamaka Eche2
1Department of Actuarial Science and Insurance, Ahmadu Bello University, Zaria Nigeria.
2Department of Insurance, Institute of Management and Technology, Enugu, Nigeria.

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Abstract: This study examined the impact of reinsurance underwriting operations on assets management of insurance companies in Nigeria. The research design employed was an ex-post facto research design. A census of all the 58 insurance and reinsurance companies listed on the Nigerian Insurers’ Association (NIA) and National Insurance Commission (NAICOM) as at 2018 was taken. Data for the study were collected from the annual publications of the Nigerian insurance digest and National Insurance Commission for 10 years’ period 2009-2018. Panel data model was applied. Hypotheses of the study were tested at 5% significant level. Regression results revealed that reinsurance underwriting operations (Risk Retention Ratio and Reinsurance Dependent Ratio) have significant impact on assets management (return on assets) of insurance companies in Nigeria. The findings support the prediction of resource based view theory. The study recommends among others, that regulatory bodies and shareholders in the Nigerian insurance industry should put in place apposite mechanisms that will ensure effective underwriting practices considering indispensability of reinsurance in assets management.
Keywords: Assets Management, Reinsurance Underwriting, Risk, Firm Size, Firm Age
Reinsurance is a major financial activity which affords direct insurance companies, by facilitating a wider distribution of risks at worldwide level, in order to have a higher underwriting capacity and provide insurance cover aimed at reducing underwriters’ capital costs. Reinsurance can be regarded as insurance of the insurer.
Oyekanmi (2016) sees reinsurance as the business of insuring an insurance company against suffering too great a loss from their insurance operations. Reinsurance can also be referred to as means of transferring the whole or part of liability of an insurance company to another insurer on a given insurance which they may have accepted. The author further said that reinsurance is the ceding of risks already accepted by an insurance company to another insurer called reinsurer. The means by which insurer lay off or pass on part of their liability to another insurer on a given insurance which they have accepted is called reinsurance. Reinsurance is a transfer of risk already insured by the direct insurer to the reinsurance company by paying reinsurance premium as consideration.