Impacts of Capital Adequacy on the Underwriting Performance in Nigeria’s Oil and Gas Insurance Industry: An Empirical Analysis

This study examines the effects of capital adequacy on underwriting performance in Nigeria’s oil and gas insurance sector. Using a balanced panel of 12 insurers over 20 years (240 firm-year observations), Random Effects regression was applied, with the Hausman test confirming model validity. The results show that capital adequacy significantly improves key aspects of underwriting performance, particularly through claims management, risk retention, and reinsurance strategies. Well-capitalized insurers exhibit lower claim ratios, more efficient claim settlement, stronger retention levels, and more structured reinsurance arrangements. By contrast, premium income and inward reinsurance acceptance were not significantly influenced, suggesting that scale-related factors are shaped more by regulatory and structural conditions than by capital strength. These findings provide partial support for the study’s theoretical framework and are consistent with capital structure theory and prior evidence. They also highlight the policy relevance of Risk-Based Capital (RBC) theory regulation in Nigeria, underscoring that solvency depends less on firm size and more on disciplined claims control, prudent risk retention, and dynamic reinsurance practices.