Insurance regulations, risk and performance in Ghana

Abstract

Purpose This study aims to examine the hypothesis that the effect of insurer risks on profitability is conditional on regulation, using two main regulatory directives in the Ghanaian insurance market as a case study. Design/methodology/approach This study used the robust ordinary least square and random effect techniques in a panel data of 30 insurers from 2009 to 2015 to test the research hypothesis. Findings The results suggest that regulations on no credit premium and required capital have insignificant effects on profitability of insurers. On the contrary, this study documents evidence that both policies mitigate the effect of underwriting risk on profitability and suggests that regulations significantly mitigate the negative effect of underwriting risk to improve profitability. Practical implications The finding suggests that policymakers and regulators must continue to initiate, design and model regulations such that they help tame risk to improve the performance of insurers in Ghana. Originality/value This study provides first-time evidence on the role of regulations in controlling risks in a developing insurance market.

Financial Stability of European Insurance Companies during the COVID-19 Pandemic

“…It indicates the company's capital intensity. Furthermore, ROA is comparable for companies in a similar industry (Boyjoo and Ramesh 2017;Kusi et al 2019).…”

What accounts for the high underwriting losses in the Ghanaian insurance industry?

“…The evidence of both Cummins and Grace (1994), and Alhassan (2018) suggest that insurers may regard underwriting losses as a beneficial tool for loss reserves and tax avoidance. Kusi et al (2020) suggest that strong regulation can tame the negative consequences of underwriting risks. Also, Chugh et al (1987) indicate that careful selection of risks is a critical determinant of underwriting performance.…”

“…Although some studies have explored the African insurance market, the underlying drivers of underwriting performance have not been explored fully. The available evidence mainly focuses on efficiency determinants (Ansah-Adu et al, 2011), competition and market power (Alhassan et al, 2015;Alhassan andBiekpe, 2016, 2019), determinants of profitability Kiptoo et al, 2021), insurance regulations (Kusi et al, 2020), risk management practices (Akotey and Abor, 2013;Atsakpo, 2019), insurance fraud (Akomea-Frimpong et al, 2016), the association between intellectual capital and insurers' performance (Asare et al, 2017;Oppong et al, 2019), insurance brokers' profitability (Kotey et al, 2021) and PESTEL analysis of insurers (Kampanje, 2014). The findings on the Ghanaian market suggest that the industry is very concentrated (Alhassan et al, 2015), leverage and market shares drive its efficiency (Ansah-Adu et al, 2011), and that investment income sets off its underwriting losses .…”

“…The findings on the Ghanaian market suggest that the industry is very concentrated (Alhassan et al, 2015), leverage and market shares drive its efficiency (Ansah-Adu et al, 2011), and that investment income sets off its underwriting losses . Others report that regulation suppresses underwriting risks, reduces inefficiencies and improves productivity growth (Danquah et al, 2017;Ohene-Asare et al, 2018;Kusi et al, 2020). Another group shows that intellectual capital significantly influences insurers' profitability (Asare et al, 2017;Oppong et al, 2019), but poor remuneration and weak internal controls drive fraudulent activities in insurance companies (Akomea-Frimpong et al, 2016).…”

Kinerja keuangan perusahaan asuransi jiwa di Indonesia berdasarkan tingkat profitabilitas

“…Studi ini menguji pengaruh profitabilitas dan menyimpulkan bahwa profitabilitas perusahaan asuransi jiwa dipengaruhi oleh likuiditas dan ukuran perusahaan, sedangkan modal berhubungan negatif. Burca dan Batrinca (2014) juga melaporkan bahwa ukuran perusahaan merupakan penentu penting kinerja profitabilitas perusahaan asuransi (Burca & Batrinca, 2014;Kusi, Alhassan, Ofori-Sasu, & Sai, 2019).…”