Reinsurance and Financial Performance of Non-life Insurance Companies in Ghana

Abstract

The study examines how premiums ceded to a reinsurer affect the profitability of non-life insurance companies in Ghana. Secondary data on reinsurance ceded, combined ratio, assets, liabilities and return on assets for 20 non-life insurance companies over the period 2008–2018 were sourced from National Insurance Commission whilst interest and exchange rates variables were obtained from the Bank of Ghana. Panel regression model was employed for the analysis of the data collected. The results show that purchasing high levels of reinsurance alone does not affect the profitability of non-life insurance companies, but the combined effect of reinsurance and solvency ratio significantly impact their profitability. Managers of non-life insurance companies in Ghana should increase their ability to repay all financial obligations in the short, medium and long term in combination with reinsurance. This will enable insurers to stabilize growth, earn profits and meet their obligations to policyholders in a timely fashion. JEL Code: G22