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Risk Retention and the Performance of Nigeria Reinsurance Corporation (1994-2024)

Author

Listed:
  • Mfon N.U. Akpan
  • Emem Matthew Joseph
  • Mfon Solomon Jeremiah

Abstract

Purpose: This study examines the influence of risk retention on the performance of the Nigeria Reinsurance Corporation, with specific emphasis on return on assets (ROA). Design/Methodology/Approach: An ex post facto research design was adopted for the study. Secondary data were obtained from the published Financial Annual Reports of the Nigeria Reinsurance Corporation covering the period 1994–2024. Descriptive statistics and regression analysis using the ordinary least squares (OLS) technique were employed to analyse the effect of reinsurance risk retention ratio, reinsurance premium-to-surplus ratio, and reinsurance loss ratio on return on assets. Findings: The empirical results reveal that reinsurance risk retention ratio, reinsurance premium-to-surplus ratio, and reinsurance loss ratio have significant effects on the return on assets of the Nigeria Reinsurance Corporation. The findings suggest that management should regularly evaluate whether the premium-to-surplus ratio is adequate to support underwriting activities. However, the study also highlights limitations associated with risk retention ratio analysis, particularly the challenge of inadequate historical data. Since the analysis relies on publicly disclosed historical financial data, ratio measures may not always accurately predict future performance. Practical Implications: The findings provide useful benchmarks for management, rating agencies, and regulators in assessing the Corporation’s solvency position and risk management practices. Improved risk retention and capital adequacy decisions can enhance credit ratings, strengthen stakeholder confidence, and ensure that the Corporation retains a sufficient level of risk from primary insurers without jeopardising financial stability. Originality/Value: This study contributes to the reinsurance literature by providing empirical evidence on the relationship between risk retention indicators and firm performance in Nigeria. It establishes that maintaining a sustainable minimum reinsurance loss ratio is critical to improving the return on assets of the Nigeria Reinsurance Corporation.

Suggested Citation

  • Mfon N.U. Akpan & Emem Matthew Joseph & Mfon Solomon Jeremiah, 2025. "Risk Retention and the Performance of Nigeria Reinsurance Corporation (1994-2024)," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 15(4), pages 87-126.
    • Handle: RePEc:ers:ijfirm:v:15:y:2025:i:4:p:87-126
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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