REINSURANCE UTILISATION AND DEPENDENCE ON THE FINANCIAL PERFORMANCE OF NON-LIFE INSURERS: EVIDENCE FROM NIGERIA

Abstract

Reinsurance is used by primary insurers as a device to cushion the effect of underwriting and solvency risks. However, an overdependence on reinsurance could cause depletion in the income of the primary insurer. The study examined the effect of reinsurance on the financial performance of non-life insurers in Nigeria. Secondary data used for this research were analysed with descriptive statistics, coefficient of determination (R2), and linear regression. Results showed a significant positive relationship between reinsurance utilisation and premium growth rate. Similarly, a significant positive relationship was found between reinsurance dependence and profitability (loss ratio). It was recommended that non-life insurers should embrace more of reinsurance facilities particularly for risks of high loss potentials in order to stabilise premium growth rate. In addition, Insurance firms in Nigeria should harness their claims management activities in order to minimise cost and exposure to underwriting risks.