Impact of Exchange Rate Volatility on Insurance Premium Pricing and Claims Payout in Nigeria

Abstract

This study investigates the influence of exchange rate volatility on insurance premium pricing and claims payouts in Nigeria, with a focus on the period 2014–2024. Using time series data analyzed through EViews 13, the study employed Ordinary Least Squares (OLS) regression to assess the relationship between exchange rate fluctuations, insurance premiums, and claim payouts. Results reveal that while exchange rate volatility negatively influences both premium pricing and claims, these relationships are statistically insignificant. Diagnostic tests affirm the models' robustness, although the RESET test suggests potential specification issues in the premium pricing model. The findings imply that Nigeria's insurance sector may be more influenced by local risks and structural factors than macroeconomic volatility. The study recommends extending the data range and incorporating additional variables to enhance model precision. These insights are crucial for insurers and policymakers in developing effective risk management strategies and enhancing public confidence in the Nigerian insurance industry.