Abstract:
This study investigates determinants of financial health of Ghanaian life insurance companies, a
market that has experienced significant change in recent years. It examines the solvency of life
insurance companies and the current system used by the National Insurance Commission (NIC)
to monitor solvency of life insurance companies in Ghana. Secondary data obtained from
financial reports of 16 sampled life insurance companies from 2007 to 2013 were analysed using
the unbalanced panel regression analysis technique. The study used solvency ratio as a proxy for
financial health and assessed the impact of nine predictor variables, both macro and firm specific
variables on it.
Analysis of the data showed that all the predictor variables, with the exception of premium
growth and reforms are significant determinants of financial health. The results also indicated
that aside claims incurred, combined ratio and inflation, all the other predictor variables are
positively related to solvency. Further, analysis indicated a weak to moderate total financial
health of the sampled life insurers during the study. It was revealed an the end of the project that
less than 40% of the registered life companies were strongly solvent every year based on the
categorization of solvency by the study. Therefore, aside the routine checks and ensuring
compliance of insurance regulation by insures which is currently done, the NIC can monitor
these ratios published annually by insurers in addition to moving towards the proposed Risk
Based supervision in order to detect early signs of insurer distress.
