Abstract:
This study analyses the impact of firm-specific and macroeconomic factors on investment risk taking behaviour of insurers and examine how insurers’ risk taking influences the financial performance of insurance companies in Ghana.
The study employs a panel regression model for the general analysis using a quantitative data sample of 16 non-life and 12 life insurance companies’, randomly selected from the National Insurance Commission database over 7 years period (2008-2014).
The analysis showed that factors such as firm size, capital, claims payment, management expense, investment income, interest rate and inflation significantly affect investment risk taking behaviour of the insurer. Firm size negatively influenced life insurance high investment risk taking and non-life insurance low investment risk taking. But the impact of firm size was found to be positive under low investment risk taking measure for life insurance. The findings revealed that life insurers with higher expense ratio have less incentive to take on more risk in asset investments. Also life insurance long term investment activities had positive impact on the financial performance of the insurance industry.
This study provide an insight into the investment risk taking behaviour of the insurance industry and suggest that policy makers in the insurance market need to encourage insurance managers and shareholders to give much attention to their operational activities by improving their underwriting risk activities and investment risk taking awareness.
