Impact of insurance risk management on fixed capital formation in Nigeria

Abstract

PURPOSE: This study investigated the impact of insurance risk management on fixed capital formation in Nigeria. The study sampled all insurance companies operating in Nigeria.

METHODOLOGY: Time series data covering the period 1996 - 2019 were obtained from the CBN Statistical Bulletin, Annual Report of National Insurance Commission, and the various Nigerian Stock Exchange Factbook issues. General business insurance and life insurance claims represent risk management (independent variable), while gross capital formation was the dependent variable. Data were analyzed using descriptive statistics, unit root, Auto-Regressive Distributed Lag (ARDL), ARDL Bound cointegration test and model diagnostic test by Stata 15 software.

RESULTS AND FINDINGS: The study found that life insurance claims exert an insignificant positive impact on gross capital formation, with a reported estimate of (p=0.058 >0.05). On the other hand, general insurance business exerts a negligible negative impact on gross fixed capital formation, with an estimate of (p= 0.065>0.05) and the non-existent long-run connection between gross fixed capital formation and independent risk management.

ORIGINALITY AND PRACTICAL IMPLICATIONS: Our study suggests that regulatory authorities should implement strategies to encourage Nigerians to patronize life insurance companies since this would lead to more excellent insurance investment and, in turn, growth in Nigeria's gross capital formation, among other things.