An Assessment of Risk Culture Practices on the Financial Efficiency of General Insurance Companies in Nigeria.

Abstract

Insurance has been adjudged to be the most effective risk management technique because of its applicability to all spheres of life. However, the inverse nature of insurance operations necessitates the need for an insurance companies to embrace a combinations of techniques through the development of risk culture. Therefore, the study assessed the influence of risk culture practices on the financial efficiency of general insurance companies in the Nigerian insurance market. The study employed correlational research design. The population comprised of forty one general insurance companies as at January, 2019. Census sampling technique was adopted using a secondary data obtained from the annual financial statements of all general insurance companies. The study used risk tolerance, risk appetite and underwriting capacity as indicators of risk culture while reserve, investment and profitability were adopted as surrogates of financial efficiency. Findings of the study revealed statistical influence of risk tolerance and risk appetite on reserve and investment respectively while there was no statistical relationship between underwriting capacity and profitability. Hence, risk tolerance and risk appetite are strong risk culture practices that guide general insurance companies in determining their level of reserve and investment strategy. The study recommended that general insurance companies in Nigeria should develop a robust risk culture to compliment widely used reinsurance arrangements. This can be done by creating a virile investment and actuarial departments that will constantly review claims fluctuations, investment pattern and monitor the reserve level.