European Journal of Accounting, Finance and Investment

Recapitalization Of Insurance Industryand Profitability In Nigeria, 1986 – 2020

URUAKPA, PETER CHINYERE

Department of Banking & Finance, Abia State University, Uturu - Nigeria

Abstract

This study examines the recapitalization of insurance industry and profitability in Nigeria. Insurance exists as risk minimizing device that mobilizes savings from premium to mitigate unforeseeable risks and channel same into the economy for productive investments. Pursuant to this, strong capital base is a sine qua non, hence recapitalization to guarantee optimum performance of  the insurance industry. The study has the following objectives:  To determine the relationship between insurance shareholders capital and return on equity; to find out if there exists any significant relationship between insurance premium and return on equity. Relevant literatures – conceptual, empirical and theoretical were reviewed.  Analysis was carried out using E-Views electronic software version 8.   Result shows that there is no long run relationship between insurance recapitalization and profitability in Nigeria.  Again, granger causality shows that insurance capital, premium, assets and investment have no granger causality relationship with returns. However, share capital, influences the direction of premium, investment and assets which indicate that recapitalization influences the growth of premium, investment and assets.  The research recommends   for further recapitalization of the insurance industry as the present capital is too poor to make any significant impact on the profitability. 2.  Aggressive marketing and advertising to attract more customers and mobilize more premium in order to enhance their profitability.  3.Slim-fit Asset structuring  that will not negatively impact on their ability to make profit. The present asset structure is hazy. weak and does not sustain long term profitability.