UNDERWRITING CAPACITY OF INSURERS IN NIGERIA: REINSURANCE PRACTICES PERSPECTIVE

Abstract

The study examined the relationship between reinsurance practices and underwriting capacity, particularly in the context of reinsurance arrangements. It also explored how risk selection by underwriters influences the profitability of Nigerian insurance companies, providing evidence-based recommendations for improving underwriting practices and optimizing reinsurance strategies. The specific objectives of the study sought to; examine the relationship between treaty reinsurance and underwriting profit as presented in the income statements of insurance firms, analyze the influence of treaty reinsurance on claims incurred and claims ratio, evaluates the impact of reinsurance expenses on the profitability of underwriting operations, investigate the extent to which treaty reinsurance affects the retention ratio of insurance companies, and study the variation in gross versus net premium growth in relation to reinsurance utilization. The target population of this study was seven insurance companies in Nigeria. These insurance companies are AIICO Insurance, LeadWay Insurance, AXA Insurance, NEM Insurance, Custodian Insurance, Regency Alliance Insurance, and Lasaco Insurance. The study adopted a longitudinal research design. Regression analysis, correlation, and ANOVA were deployed for the analysis of data. The study concluded that well-structured and efficiently managed treaty reinsurance arrangements, when integrated with sound underwriting practices, can substantially enhance the financial performance and operational stability of insurance companies in Nigeria. It is, therefore, essential for insurers to continuously refine and optimize their reinsurance strategies to boost profitability, improve claims handling, and maintain sustainable retention levels in an increasingly volatile risk environment. The study. The study recommends that since the significant relationship between treaty reinsurance and the claims ratio underscores the need for insurers to improve their claims management frameworks. While reinsurance supports risk-sharing, excessive claims can erode profitability. Insurance firms should adopt robust claims auditing systems, invest in loss prevention programs, and regularly review reinsurance recoveries to minimize inefficiencies among others.