Risk Management and Insurance
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Item Fiscal Policy And Insurance Growth In Africa.(University Of Ghana, 2021-12) Lartey, W.Most literature have established the existence or not of the relationship between insurance growth and economic growth. With some studies concluding that, whether or not economic growth causes insurance growth depends solely on the country under study and its prevailing economic conditions. Although in some countries, it has been established that economic growth does cause insurance growth, there may be specific factors within the economic growth that affect growth in the insurance sector as well. Amongst such determinants of economic growth are fiscal and monetary policy. This study examines the relationship between fiscal policy and insurance growth in Africa using panel data with a total of 30 African countries and a time interval of 20 years (thus from 1997 to 2017). The data for the study were obtained from the Global Financial Development Database and World Bank Development Indicators. The determinants of insurance growth in Africa are studied using a cointegration analysis. Investigation on a bi-causal relationship between fiscal policy and insurance growth is carried out using the Toda Yamamoto bi-causality test procedure. The results suggest that there is a long run relationship between insurance penetration (whether life or non-life), government expenditure, gross domestic product (GDP) growth, life expectancy, population growth and inflation. Also, the results of the bi-causality test show that insurance growth; measured by insurance penetration causes government expenditure but government expenditure does not cause insurance growth. The study informs policy makers in the African countries under study on the direction in which fiscal policy should go in order to enhance the growth of the insurance sector in these countries. Keywords and phrases: government expenditure, fiscal policy, life insurance penetration, non-life insurance penetration tax revenue, Toda-Yamamoto bi-causalityItem Determinants Of Comprehensive Motor Insurance Pricing In Ghana(University Of Ghana, 2021-12) Nachinab, J.The purpose of this study is to identify relevant factors that influence comprehensive motor insurance pricing in Ghana. The study used primary data by way of issuing questionnaires to the underwriting department of 20 insurance companies out of the 29 insurance companies and a sample of 300 individual comprehensive motor insurance policy owners in Ghana. Multiple regression was used to show the impact of the various determinants of premium and how statistically significant they are in predicting premiums. The study further employed quantile regression to further explain the impact of the explanatory variables over different percentiles of the data set. The findings suggest that the relevant determinants of premium includes, the sum insured, the discount percent the cubic capacity and the duration the policyholder has kept of the policy with the insurer. However the study identified that in practice, the age and gender of drivers are not considered in pricing. The National Insurance Commission is recommended to enact regulations to ensure that all relevant and essential risk determinants are incorporated in risk to classification. This is to ensure satisfaction and enhance a good relationship among players in the industry so as to increase the insurance penetration in Ghana. Keywords and phrases: Comprehensive motor insurance, multiple linear regression, simultaneous quantile regression, sum insured.Item Factors Affecting the Timeliness of Corporate Non-Life Insurance Claims and the General Claims Management System in Ghana(University of Ghana, 2020-07) Affum, C.B.This study explored the actions of policyholders that affect the timeliness of claims settlement (the reporting time of incidence (RTT), understanding of policy’s term and conditions (PTC), provision of information and documents (PID), review of insurers by policyholders (RA)). The study also examined from the insurers’ point of view, some of the factors surrounding claims settlement and finally established some challenges faced by both parties externally in the claims process. Data collection was done by administering questionnaires to corporate policyholders and non-life insurance providers. Data obtained from randomly selected corporate policyholders was analyzed using the ����+ regression method. Results from the regression showed that a delay in reporting of incidences reduced the chances of receiving claims on time while a better understanding of policy’s terms and conditions and, a good provision of information and documents increased the chance of claims being paid on time. Also, how policyholders view and rate their insurers affect the timeliness of their claims settlement. A descriptive analysis was carried out for the data collected from insurers and results showed that insurers do not view the quantity and quantum of claims made as a factor to delays in claim settlements. In addition, some challenges faced by policyholders are poor customer services, complicated paperwork, delays in brokers’ activities and procrastination of payment. Some challenges insurers face during the claims process are delays in the reporting of claims by claimants, delays from the insured in presenting documents to substantiate claims, fraudulent claims, exaggeration of claim amounts, rush to go to court by some solicitors, sometimes issuing a write off summons before informing the insurer about the claim, misunderstanding of policy terms and conditions by insureds, cash flow challenges, delays in receiving reports from loss surveyors and other third parties, lack of local loss adjustors to handle complex claims, inadequate staffing of the claims department, underinsurance and poor attitude of claims management staff. The results found educates policyholders on how certain actions affect their claims settlement which will help put in place necessary measures in other to avoid any inconvenience. This study also creates awareness on issues concerning insurance claims which will soften the blame on the insurer and improve upon the image of insurance companies.Item Technical Efficiency, Risk and Capital Requirement of Insurance Firms in Ghana(University of Ghana, 2021-05) Attah-Kyei, D.This study examines the effect of recapitalisation on technical efficiency and risk of life and non-life insurers in Ghana. The study uses balanced panel data for 14 life and 17 non-life insurers from 2008 to 2017. Data is sourced from the annual reports submitted to the National Insurance Commission. The research work evaluates technical efficiency by employing a Data Envelopment Analysis that allows for the addition of multiple inputs and outputs in the production frontier. Both panels fixed effect and random effect models are used to determine the relationship between recapitalisation and technical efficiency. The study also uses a random effect model to determine the relationship between recapitalisation and insurer’s risk. The results show that recapitalisation has a significant positive relationship with technical efficiency, indicating the importance of recapitalisation in improving technical efficiency. Also, there was a significant positive relationship between recapitalisation and the risk of the insurer. This implies that, as the capital requirement of insurers increases, the risk of the insurer increases. The major determinants of technical efficiency of Ghanaian insurers include risk of the insurer, market share and expense ratio. Major determinants of insurance risk in Ghana are the type of insurer, size of the firm as well as the market share of the insurer. Policywise, the findings of this study reinforce the suggestion by the Actuarial Society of Ghana that policymakers and regulators should adopt a risk-based capital system and must continue to initiate, design and model regulations that will help reduce risk and improve technical efficiency of both life and non-life insurers.Item Foreign Direct Investments and Economic Growth – Investigating the place of Financial Stability(University of Ghana, 2020-09) Angmosi, B.A.The role of financial stability in the relationship between foreign direct investments (FDI) and economic growth is extensively examined in this study to provide a much-needed understanding of the extent of financial stability required for economies in Sub-Sahara Africa (SSA) to reap positive benefits from FDI, if at all it has any relevance in the nexus. Annual data on forty-six (46) SSA economies for thirteen years (from 2006 to 2018) is used in the investigation. The two-step System Generalized Method of Moments (SGMM) estimator is demonstrated to be a suitable technique for this study. Departing from the usual approach which depends on contemporaneous flows, stocks of FDI are generated and used in this study to account for both contemporaneous values and their lags in establishing the relationship. The study reveals that FDI stocks as well as financial stability do have significant negative effects on economic growth as stand-alone factors. When FDI stocks and financial stability are interacted, however, a positive relationship ensues, implying that FDI stocks cause SSA economies to grow in the presence of stable financial systems and otherwise. Further investigation of this interaction shows that the impact of FDI stocks on these economies, at the margins, tend to change with the level of financial stability. That is, at low levels of stability (below the regional mean), the combined effects are negative and significant. These effects gradually change from negative to positive as the level of financial stability rises beyond one standard deviation above the mean, although not with significant coefficients. It is thus clearly demonstrated that the place of a stable financial system in ensuring sustained economic growth in SSA cannot be overemphasized, as the absence thereof may allow other factors to adversely affect these economies, which would have been beneficial otherwise.Item Determinants of Bank Risk in Ghana: Are there Differences between Local and Foreign Banks?(University Of Ghana, 2019-07) Nutsuglo, Z.R.This research examined, among other factors, the impact of the changing bank income generation activities on bank risk, how other types of bank funding strategies affect bank risk and the role of Corporate Governance on bank risk. It also examined whether these factors are significantly different between local and foreign banks in Ghana. A review of the financial sector, specifically, the banking sector in Ghana, indicates that more locally owned banks often collapse over time. Academic discussions and research about bank risk have considered some factors that are believed to influence bank risk such as ownership structures and income diversification. However, these studies often have results and findings which are divergent in views, on the extent or levels at which these variables affect bank risk. The study employed panel regression model with Breusch-Pagan Test for Heteroscedasticity and Wooldridge test for autocorrelation to examine how Fees/Commission Income (FINC), which is income generated from non-traditional activities of banks, Non-Deposit Funding (NDEPF) of bank activities by capital other than customers deposit, and Corporate Governance variables impact on the risk of banks in Ghana. Results of the study showed a significant positive relationship between NDEPF bank stability for banks in Ghana. Again, the findings showed that whiles Corporate Governance variables such as Board Gender ratio had a positive significant relationship for bank stability and profitability in Ghana. The interaction of FINC and NDEPF had a significant negative relationship on bank risk for banks in Ghana. With all conditions held constant, locally owned banks are riskier than foreign owned banks.Item Competition, Cost Efficiency and Solvency of Non-Life Insurers in Ghana(University of Ghana, 2019-07) Ackomah, H.G.This study examines the effect of competition on the solvency of non-life insurers in Ghana. It further examines the role of cost efficiency in the competition- solvency nexus. The study uses firm level yearly data from the National Insurance Commission on 26 non-life insurers from 2008 to 2017. Using ordinary least squares panel corrected standard error, generalized least squares and systems generalized methods of moments, the study reveals that market power (competition) enhances (reduces) cost efficiency. This rejects the quiet life hypothesis. Furthermore, the analysis of the study reveals that market power enhances the solvency of non-life insurers, supporting the competition-fragility hypothesis. Finally, on the role of cost efficiency in the competition-solvency nexus, the findings suggest that market power enhances solvency of non-life insurers through cost efficiency. Investment income and leverage are significant determinants of insolvency while total assets and leverage are significant determinants of cost efficiency. Findings of this study will improve understanding on non-life insurers’ competitive behaviour and its consequences to shape regulatory competition policies for consumer interest while providing a stable insurance market for economic development. Keywords: Competition, Cost Efficiency, Market Power, Solvency, System Generalized Methods of Moments, Underwriting RiskItem The Effect of Expansion of Coverage and Employers’ Compliance on Pension Fund: A Case Study of SSNIT Teshie-Nungua Branch(University of Ghana, 2019-05) Ofori, E.M.The main purpose of the study was to examine the effect of expansion of coverage and employers’ compliance on pension fund. The study employed the convenience sampling design and sampled 150 Employers on the SSNIT scheme and 50 Staff of SSNIT for data collection purposes. The data was analyzed with the Statistical Package for Social Sciences. On the level of employers’ compliance, it was identified that employers pay their workers’ contributions regularly by the deadline for prudent investment of the pension fund and also, there has been a decrease in the non-compliance of workers’ contributions payment by employers due to enforcement of the compliance law. However, most of the employers have never faced a penalty on delayed payment of workers’ contributions. The overall level of compliance by the employers was noted to be high. The leading causes of employers’ compliance on pension’s scheme were observed to be the idea of retaining employees and stringent penalty rates. Other causes such as financial security in the future and legal obligations attached to pension scheme compliance were added by the employers. With references to the effects of employers’ compliance on pensions, the study noted that there has been an increase in pension funds and meeting investment expectations of pension funds. Nevertheless, the pension funds were not properly invested. In addition, the staff members were of the view that they achieved most pension fund goals, and SSNIT mostly benefited from the expansion of coverage. The overall rating of the success of the pension fund, which results from expansion of the scheme was considered good by the staff members. Based on the results of the study the following recommendations are worth considering. Since pension funds were not invested promptly and does not yield required returns, it is recommended that the management of pension funds should establish a strong organizational structure and policy implementation, which will enhance their portfolio composition. A solid organizational structure will also influence the firms’ investment portfolio choice leading to improved investment returns. In addition, the study recommended that payment of contributions by employers should continue adhering to the set regulations. From the study findings, regulation was found to have a significant influence on payment of contributions by employers and hence, managers of the Trust should put more measures in place to ensure that they are compliant. To ensure timely payment of contributions by employers, and deal with misappropriations of pension funds and investment/assets, SSNIT authorities must ensure effective implementation of the penalties provided by the non-compliance law, regardless of their position, status, affiliation or origin. Pension Fund Administrator should be transparent in their dealings and accountable to their clients through regular update of the employees’ contributions status. The contributory pension scheme should be encouraged by its practitioners in the form of provision of adequate means of sensitization or interactions such as seminars to continually update employers and employees on the benefits of the pension scheme and its importance on life after retirement.Item Public Perception and Patronage of Life Insurance in Ghana: Evidence from Volta Region.(University of Ghana, 2018-07) Ahorgah, R.J.This study examines perception that the public have about life insurance companies and their services in Ghana. The objectives of the study were to examine public awareness and perception of life insurance services in the Volta Region, identify factors that influence patronage of life insurance in the Volta Region and evaluate the barriers/constraints that affect patronage of life insurance services in Volta. The study was a cross-sectional conducted on 150 simple randomly selected respondents in the Volta Region of Ghana. The study employed a five point Likert scale, frequency analysis, percentages, mean, standard deviation, Probit regression model and the Kendall’s Coefficient of Concordance (W) were employed to analyze the objectives. Descriptive analysis showed that majority (57%) of the respondents were males whereas 43% of the respondents were females. Analysis of data showed that quite significant number of the respondents of about 78.67% were aware and have heard about life insurance packages whiles a few of about 21.33% expressed unawareness of life insurance policies in the system. Also, about 35% of the respondents adopt or subscribed to life insurance package whiles majority of the respondents of about 65% indicated that they have never subscribed for life insurance nor any other type of insurance package in the Volta Region of Ghana. 81.33%of respondence have expressed negative perception towards life insurance services. The factors that were significant to influence patronage of life insurance scheme were gender, age, level of education, access to life insurance Company, perceived health status, monthly expenditure of respondent, and cost of life insurance premium. Kendall’s Coefficient of Concordance (W) statistic was significant at 5% indicating that there was 74% level of agreement among the respondents’ in rankings of the constraints faced in patronising life insurance policy. It was revealed that major constraints or challenge faced by respondents in patronising life insurance policy were; high cost of premium on insurance products, low reward/compensation rate, unreliable insurance services, lack of education on the benefits of life insurance, limited disposable income, mistrust and negative perception and delayed claims payments. The study concluded that majority of the respondents were aware of life insurance packages but proportionally few of the sampled respondents subscribe for life insurance packages. The reason was specified through interviews that cost of insurance premium, the bureaucracy and delay in payment of claims to beneficiaries, poor education of insurance packages. However, factors that influence patronage of life insurance were identified as; gender status of a respondent age, years of schooling, access to life insurance Company, perceived health status, monthly expenditure of respondent, and cost of life insurance premium. The study recommends that education on insurance organisations and life policy should be intensified by the Insurance Companies, NGO’s and other financial agents in order to minimise or alleviate the negative perception the public hold about insurance policies. This would eventually increase the level of awareness and subscription of the policy. Also, management of the insurance companies should consider the significant of socio-economic variables in their decision making whiles strengthening laid procedures for insuring new clients in order to make the policy more attractive to the general public. It is suggested that the management of insurance companies pay more attention to the identified constraints faced by respondents in their intention to subscribe for insurance policies in order to attract more individuals to subscribe to insurance policies.Item Optimal Asset Allocation of Defined Contribution Pension Funds in Ghana(University of Ghana, 2018-07) Baidoo Jnr, M.The study investigated asset allocation of defined contribution (DC) plan in Ghana using the Tier 2 Master Trust Occupational Pension Scheme (MTOPS) as a case study. The focus of the study was to compare optimal asset allocation solutions under quantitative restrictions and prudent person’s principle and further assess the risk exposure of portfolio returns using CVaR. The financial market invested by MTOPS predominantly consisted of six financial assets: government securities and bonds, corporate bonds, the money market (T-Bills and Cash deposits), listed equities, other collective investments and open and close end funds. The investment returns from MTOPS followed a geometric Brownian motion and simulated for 10,000 scenarios over 50-year time horizon. Most MTOPSs violated some quantitative restriction guidelines such as Petra whose average allocation to the money market was 54.64% which exceeds 35% of the NPRA investment guidelines. However, the average investment returns of the six financial assets were within the limits. Beyond the investment restrictions, MTOPS allocated higher Master Trust Funds (MTF) in low-risk assets: government securities and bonds, T-bills and cash deposits. On the average, low-risk assets seem to be more rewarding and stable compared to high-risk assets in the short-term. High-risk assets however outperform low-risk assets in the long-term. Only MTOPS with large market share allocated considerably in high-risk assets: corporate bonds and listed equities. Financial assets were weak and negatively correlated which is indicative of a more diversified portfolios of MTOPS. The average MTOPS allocated 43.01% of MTF in government bonds and securities, 35.61% of MTF in the money market specifically in T-Bills and cash deposits, 18.30% in corporate bonds, 5.79% in listed equities, 3.02% in other collective investments, and 4.67% in open/close end funds. At optimal levels, MTOPSs are expected to invest 55.11% of MTF in government securities, 0.08% in corporate bonds, 34.99% in the money market, 0.81% in listed equities, 4.75% in other collective investments, and 4.98% in open/close end funds under quantitative restrictions. Applying the prudent person’s principle, optimal solution was obtained by investing 70% in government securities and bonds, 10% in corporate bonds, 10% in the money market, 7% in listed equities, 1.8% in open/close end funds and 1.2% in other collective investments. This indicated an investment return of 20.93% with 12.43% average portfolio risk as compared to 20.56% investment return with 6.79% portfolio risk in the restricted optimization. Given the investment returns over time, CVaR for the total portfolio was 12.81% at 95% confidence level in the worst-case scenario. The fund value based on current average allocations outperforms the optimal allocations in the long-term due to higher allocations of high-risk assets that accumulate higher returns in the accumulation phase. Keywords and Phrases: Defined Contribution; Master Trust Occupational Pension Scheme; Optimal Asset Allocation; Prudent Person’s; Principle Quantitative RestrictionsItem Impact of Claims Complaints on Profitability of Non-Life Insurance Operations in Ghana(University Of Ghana, 2018-07) Quist, J.The purpose of the study was to determine the relationship between number of claims complaints and non-life insurer profitability in Ghana between 2010 and 2016. The focus was to find the impact of claim complaints on profitability of insurance firms in Ghana using panel data regression. The study randomly sampled 12 operating insurers and used secondary data from the National Insurance Commission (NIC) during the period 2010-2016 of the selected insurers. The study revealed that complaints correlated negatively with ROA, premium growth, claims incurred, investment yield, leverage and the lag of ROA. The study however revealed complaints was correlated positively with liquidity. The model indicated that 64% variation in ROA was explained by the independent variables. The panel fixed effect estimation result of the study revealed that there exist a significant and negative relationship between complaints and profitability of insurance companies in Ghana. The study concluded that increased number of complaints reduces ROA, lag of ROA, investments yield, growth of premium and claims incurred significantly. Empirically, complaints on the average reduce ROA by 31.3% annually. Increase in complaints however was found to increase the liquidity base of insurance companies. The study forecast that the performances of high claims paying Ghanaian non-life insurance companies would be less profitable and suggests all claims issues must be investigated before payment is made. Other variables that impacted positively on ROA were investments, growth and leverage even though their impact was insignificant except investments yield. Amongst others, the study recommended that complaints should be handle with the need attention in order to retain customers and protect long-term stream of profit because of its negative impact. Keywords: complaints, claims, Ghana, non-life insurance firms, premium, profitability.Item The Effects of Holidays on the Ghanaian Equity Market(University Of Ghana, 2018-07) Kudjawu, A.F.This thesis sought to determine if the Ghana Stock Exchange (GSE) is a semi-strong efficient market by investigating whether or not the holiday effect exists. This was done by adopting an ARMAX (2, 2) - GARCH (1, 1) model with 𝐺𝐿+ distribution and the results were further used to estimate the VaR and CVaR at 5% significance levels. The data employed were the daily closing prices of the financial main index; GSE-All Shares and GSE-Composite Index (GSE-CI) from the 3rd January, 2007 to 30th December, 2016; a 10-year period. The results from this research show that there is a significant positive pre-holiday effect and a significant positive post-holiday effect which may not be as a result of bearing higher level of risk. These results suggest that investors on the GSE currently trade more on the 7th trading day preceding and on the 7th trading day after a holiday particularly the Farmers day holiday. The associated risk levels for the Farmers day pre-holiday effect was relatively low, however this was not the case for the Farmers day post-holiday effect. The 7th trading day after the Workers day holiday also had a positive and significant returns which was not as a result of risk. The research is important to investors because it will help them to strategize better in order to take advantage of this calendar anomaly discovered on the Ghana Stock Exchange (GSE). Keywords and phrases: ARMAX, calendar anomalies, efficient market hypothesis, GARCH, 𝐺𝐿+ distribution, holiday effect.Item Impact of Extreme Events on the Insurance Market in Ghana.(University of Ghana, 2018-07) Yamoah, S.A.The study examines how the frequent occurrence and severity of extreme events affect the demand, supply and the profitability of insurance companies in Ghana. Secondary data collected from NIC, NADMO, Ghana Statistical Service and Open Data Initiative on eight classes of business as well as thirteen life and non-life companies over the period 2007 – 2016 was analysed using a panel regression method. The results indicated that the unexpected frequency of extreme events negatively affected both the demand and supply of insurance but had no influence on insurers’ profitability. Also, the unexpected severity of extreme events significantly decreased the profitability of life insurers but had no effect on non-life insurers. Therefore other avenues, such as public awareness and education can be explored in order to increase insurance demand and ensure the availability and affordability of insurance to all. Insurers are also encouraged to consistently assess the exposures of their investments, capital and reserves to extreme events.Item Determinants of Reinsurance Demand in The Ghanaian Insurance Market(University of Ghana, 2017-07) Brown, B.This study examined the nature and determinants of reinsurance demand by insurance companies in Ghana. Data gathered from financial reports of insurance companies and macroeconomic variables from the Bank of Ghana database for a period of 7 years (2007-2013) was analysed using the panel random effect regression. The study found firm size, underwriting risks, insurance leverage, profitability and solvency margin to significantly influence reinsurance demand by insurance companies in Ghana. Macroeconomic variables as well as ownership structure, number of years, growth in premium, liquidity, business concentration and product diversification were found not to be a significant factor in reinsurance demand. Based on the study findings, the study recommended that insurance companies, policy makers, regulators, and insurance analysts take the issue of reinsurance with much importance.Item Economic Capital Requirement of Life Insurance Companies in Ghana: A Comparative Analysis of Risk-Based Capital and Solvency II Models(University of Ghana, 2017-07) Adinyira, GThis study computed the Economic Capital Requirement of the average life insurance company in Ghana, using both the Risk-Based Capital Model as used in Ghana and an understanding of the Solvency II model used by the European Union. The Risk-Based Capital Model used in Ghana does not capture the variations in the risk variables in the life insurance industry; meanwhile, the Solvency II approach focuses on such variations. This study focused on two main risk variables: T-bill rate and inflation. These risk variables were included in the valuation models used for valuing the average life insurance company‟s assets and liabilities. The research determined that when the risk variables are adequately captured in the computation of the Economic Capital for the average life insurance company in Ghana, the life insurance company would be required to increase its available capital resources 1052 times in order to adequately meet the condition for solvency. The study, therefore, recommends that the Regulatory Authorities revise the current Risk-Based Capital Model to capture some of the variations in some risk elements so as to adequately prepare for the risks covered by the average life insurance company in Ghana. Thus, preventing the insolvency of the life insurance companies.Item Pricing of Guarantee Returns on Defined Contribution [DC] PEnsions Schemes in Ghana.(University of Ghana, 2017) Addo, R.K.Ghana since the implementation of the 3-tier pension schemes, has no guarantees on the tier-2 DC, which brings the problem about the safeness of contributors’ retirement funds. Analysis of the tier-1 and the tier-2 schemes show that the returns in both cases at retirement, [thus the value of annuity of tier-1 at retirement and the value of tier-2 at retirement] by ratio analysis is almost the same. There are some instances where the tier-2 is half of the tier-1, or even more. Which clearly brings in mind the need of such value to be guaranteed, even if not all, but some minimum returns underlining the fact that the risk of investment on tier-2 are all absorbed by the contributor. Pension guarantees in general would appear to be inexpensive. Guarantees of pension income generated by capital guarantee is low, and may result in the individual falling back on the state, because their pension funds are less than any minimum income guarantee. However, other forms of guarantee such as 5% rate provides a safe net for the retiree with cost comparable with the charges. There is the need for a regulators and policy makers to design guarantees on the mandatory DC scheme, at least a capital guaranteeItem Cash Flow Risk Management in the Ghanaian Insurance Industry (A Dynamic Factor Modelling Approach)(University Of Ghana, 2017-07) Tsevi, F.K.S.A.This study investigated determinants of Cash Flow in the insurance industry, explained the time-varying patterns of Cash Flows and forecasted future Cash Flows for Cash Flow risk management. Sample financial data of 21 non-life insurance firms in Ghana from the year 2007 to 2015 was used for this Study. Statistical analyses were made using a combination of pooled ordinary least squares methods, principal component analysis and a novel Factor Augmented Autoregressive (FAAR) Model to incorporate capital management, risk management, financial (investment) management, firm characteristics, underwriting activities, and macroeconomic variables to forecast future Cash Flows. The study provided new evidence regarding the relationship of firms’ management activities with Cash Flow risk management. Findings indicate that Cash Flow in the Ghanaian insurance industry is significantly driven by capital ratio, short term and long term investment ratios and industry-specific variables such as reinsurance ratio and net premium received ratios. The results also validated the acute forecasting ability of FAAR (DFM) models in predicting future Cash Flows. In addition, the identification of possible variations in Cash Flows using the FAAR forecasting model can help firms to further apply different financial instruments to manage and control Cash Flow variations. i.e. Cash Flow Risks (Shortfalls). Findings imply that firms can generate favourable Cash Flows to meet future obligations such as dividend payments and unexpected insurance claims by controlling variables such as capital ratio, short term and long term ratios, reinsurance and net premium received to assets ratios.Item Investment Risk taking Behaviour of Insurance Companies in Ghana(University of Ghana, 2016-07) Asare, M.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.Item The Role Of Fixed Income In Pension Scheme Investment In Ghana(University of Ghana, 2014-07) Afari, K.B.Pension scheme providers in Ghana adopt different asset allocation (the proportion of pension funds that need to be invested into different assets like equities and bonds) as an investment strategy. For instance, SSNIT seems to adopt a 60% bond allocation (fixed income investment) and 30% equity allocation (non-fixed income investment) as an investment strategy over the last decade. This study investigates the role of fixed income in pension schemes investment in Ghana by specifically looking at the asset allocation and the initial investment required to make the scheme solvent in the future at a specified high probability after matching all liabilities in Ghana. This thesis examines some basic risk and return characteristics of historical data. The best asset to invest in without matching liabilities as well as the liabilities paid by pension schemes in the future is also investigated. The asset allocation and the minimum initial fund required to make a scheme solvent at a specified probability in the future after matching liabilities using a stochastic asset-liability model under the closed pensioners’ portfolio is also examined. The stochastic asset model (mean-variance model) is adopted in the projection of returns of asset classes as well as the determination and projection on liabilities paid by pension schemes over a 40-year period. The investment strategy is examined using a stochastic asset-liability model. Looking at the assets-only analysis of pension schemes without matching their liabilities, equity appears to be an attractive asset classes to invest in. However, considering asset-liability analysis, bonds (specifically One-year bonds) are the best-matched liabilities since they have good risk-adjusted returns and are less risky. The asset allocation moves from equity towards bonds (specifically One-year bonds) at a higher solvency level and the minimum investment required also increases as the solvency level increases. This study has a significant implication for adopting the appropriate investment strategy by pension fund managers.Item Risk Based Supervision Of Insurance in Ghana: Prospects and Challenges(University Of Ghana, 2015-06) Twumbarima, S.The purpose of the study is to investigate susceptible risk activities of insurers from the new risk-based supervision framework and determining whether a significant difference exists between the inherent risk exposures of insurers and their risk management control functions. The development of better and effective strategies for prioritizing resources as a way improving the financial health of insurance companies coupled with risk management controls to avoid insurers’ insolvency has been the main aim of the new risk-based supervisory framework. In order to identify threats and devise measures to tackle and avoid insolvency of insurance firms, it is critical to investigate the activities of insurance firms and determine the significant characteristics of those activities that contribute to financial unhealthiness. A survey study involving 200 respondents were randomly selected from insurers in the Ghanaian insurance industry for this study. Various descriptive statistics, test of mean difference and the probit regression model were used in this study to help achieve study results. The results of the study showed that significant factors of an insurer’s insolvency are contributed by both inherent risk activities and risk management control functions, albeit dominated by the inherent factors. The effect of significant inherent risk activities of insurer’s is twice as high as the risk management control activities of insurance companies. Insurers risk profile comprises the intrinsic business risk activities of insurers, their operational management and their risk control and supervision functions. The significant risk activities identified are toward insolvency of insurance companies, therefore the study recommends that insurers prioritize risk activities and provide risk mitigating tactics; regulatory authority must reorganize supervisory controls and provide technical assistance to help insurers keep abreast of their ever-changing risk profiles.