TABLE OF CONTENT
Table of content
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
2.0 LITERATURE REVIEW
3.0 Research methodology
3.1 sources of data collection
3.3 Population of the study
3.4 Sampling and sampling distribution
3.5 Validation of research instrument
3.6 Method of data analysis
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.2 Data analysis
This study is on Re-insurance risk management on financial performance of listed insurance company in Nigeria. The total population for the study is 200 staff of selected insurance companies in Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up directors, risk officers, marketers and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
- Background of the study
Insurance companies play an important role in the financial services sector of most countries by lowering total risk, contributing to economic growth and efficient resource allocation, reducing transaction costs, creating liquidity, facilitating economies of scale and spreading financial losses (Duompos, Gaganis, and Pasiouras, 2012). They do this through underwriting of risks inherent in most sectors of the economy and provide a sense of peace to most economic entities. Consequently, the financial performance of insurers is of major importance to various stakeholders such as shareholders, policyholders, agents and policymakers (Charumathi, 2012).
Due to globalization and intense competition, risks are increasing and risk management is becoming an integral part for the success of almost every organization, especially for the insurance sector because of their high-risk businesses, as the risks are associated with every client in the business and their own risk. Insurance companies are in the core business of managing risk (Gupta, 2011). The companies manage the risks of both their clients and their own risks. This requires an integration of risk management into the companies’ systems, processes and culture (Eric, 2005).
The risk management process consists of a series of steps, which are establishing the context, identifying, analyzing, assessing, treating, monitoring and communicating risks, which allow continuous improvement of decision making (Ross et al., 2009). By implementing risk management insurance organization can reduce unexpected and costly surprises and effective allocation of resources could be more effective. It improves communication and provides senior management a concise summary of threats, which can be faced by the organization, thus ultimately helping them in better decision making.
Financial performance is a measure of a firm’s overall financial health over a given period of time. It can be measured from various perspectives including: solvency, profitability, and liquidity. Solvency measures the amount of borrowed capital used by the business relative to the amount of owner’ equity capital invested in the business. For insurers, profitability is the excess of revenues from underwriting activities over the costs incurred in generating them (Almajali et al., 2012). The financial performance of an insurance company depends on many other factors, some of which are difficult to quantify, including the quality of its management, organizational structure and systems and controls in place. An assessment of financial soundness thus needs to take into account both quantitative and qualitative indicators to achieve an acceptable degree of reliability (Udaibir et al., 2003).
According to Njogo (2012) risk management is the identification, assessment and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary. Risk management ensures that an organization identifies and understands the risks to which it is exposed. Effective risk management seeks to maximize the benefits of a risk while minimizing the risk itself.
Various authors have asserted that risk management (RM) often leads to enhanced organisational performance. Proper and efficient RM by insurance firms is essential to the survival of most organizations and will generally influence their financial performance. A structured RM approach is therefore essential for achievement of better organizational results (Ashby et al, 2013; Banks, 2004). Thus, this study explores the impact of risk management on the performance of insurance companies in Nigeria
1.2 STATEMET OF THE PROBLEM
Whether in the insurance industry or any other sector of the financial system, a company’s risk management procedure is widely believed to be crucial to the success of the enterprise as it acts as a powerful brake on the possible deviations from the predetermined objectives and policies. This means that an insurance firm that lacks adequate risk management technique is prone to fraud, bankrupt, static, experience retardation of growth or even die a natural death a result of sub-optimal performance.
Insurance firms in Nigeria over time have shown an irregular trend in performance; ranging from some recording financial losses to some being pushed out of business. This may not be unconnected to inadequate liquidity management, underpricing, management issues and high tolerance to investment risks.
While much empirical works have given diverse reasons for the poor financial performance of insurance companies, research evidence on the effects of risk management on the corporate performance of insurance firms in the Nigerian context is scanty. Thus inadequate risk management could be negatively affecting the financial performance of insurance companies in Nigeria. Although prior research studies such as Hermanson and Rittenberg (2013); Kiragu (2014) suggest a link between risk management and organisational performance, majority of these studies have concentrated mostly in banks and other financial institutions and the available studies so far have dealt exclusively with large financial institutions in advanced countries. Little is known, at present, about the influences of risk management on the corporate performance of insurance companies in Nigeria. It is in an attempt to fill this gap that this study seeks to assess the effect of risk management on the performance of insurance companies in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The objectives of the study are;:
(i) To examine the impact of risk management on the performance of insurance companies in Nigeria.
(ii) To find out the relationship between risk selection and financial performance of insurance companies in Nigeria.
(iii) To measure the impact of risk management on demand for insurance in Nigeria.
1.4 RESEARCH HYPOTHESES
HO: there is no impact of risk management on the performance of insurance companies in Nigeria.
HI: there is impact of risk management on the performance of insurance companies in Nigeria.
HO: there is no relationship between risk selection and financial performance of insurance companies in Nigeria
HI: there is relationship between risk selection and financial performance of insurance companies in Nigeria
1.4 SIGNIFICANCE OF THE STUDY
The study will be very significant to students and the insurance companies in Nigeria. The study will also give a clear insight on the Re-insurance risk management on financial performance of listed insurance company in Nigeria. The study will serve as a reference to other researcher that will embark on the related topic
1.5 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers Re-insurance risk management on financial performance of listed insurance company in Nigeria.
LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work
- DEFINITION OF TERMS
INSURANCE RISK MANAGEMENT: Insurance Risk Management is the assessment and quantification of the likelihood and financial impact of events that may occur in the customer’s world that require settlement by the insurer; and the ability to spread the risk of these events occurring across other insurance underwriter’s in the market
FINANCIAL PERFORMANCE: Financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. The term is also used as a general measure of a firm’s overall financial health over a given period
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows
Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study