Underwriting Risk and Performance in the Non-Life Insurance Sector in Nigeria

Abstract

Insurers face underwriting risk in their basic operations, which, if inadequately managed, may threaten their profitability. This study aimed to examine the impact of underwriting risk on the performance of publicly traded non-life insurers in Nigeria. This research employed an ex post facto design, utilising data spanning 13 years (2012-2024) from the audited annual reports of 11 insurance companies. The random-effects regression model indicated that underwriting risk has a significant negative impact on underwriting profit and a significant positive impact on the expense ratio. Insurance businesses are advised to enhance their risk assessment frameworks, implement actuarially robust pricing models, and further develop their data analytics capabilities. They must institutionalise rigorous underwriting criteria and enhance internal monitoring systems to mitigate risk buildup, while focusing on cost-containment techniques such as process automation, efficient claims administration, and the elimination of administrative overheads. By using these measures, they can improve underwriting profitability, minimise cost inefficiencies, and secure long-term financial sustainability in a progressively competitive and uncertain insurance market.