Effect of Risk Management on the Performance of Selected Insurance Companies in Nigeria

Abstract

Insurance companies play a critical role in providing financial protection and stability within Nigeria’s economic system. However, despite their importance, the industry is faced with the problem of low penetration and performance inefficiencies, partly due to inconsistent implementation of structured risk management practices. This study examined the effect of risk management on the performance of insurance companies in Nigeria, focusing specifically on risk control and risk monitoring as key components. A cross-sectional survey design was adopted, and data were collected from senior and middle management personnel across all 58 licensed insurance firms in Nigeria, yielding an estimated population of 580 respondents. A census sampling technique was employed to ensure adequate representation of risk managers, compliance officers, underwriting managers, and financial executives who possess direct knowledge of risk management processes. Data were gathered using a structured questionnaire and analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) through SmartPLS software. The results revealed that risk control had a strong, positive, and statistically significant effect on the performance of insurance companies (β = 0.677; p = 0.000), explaining the importance of structured control mechanisms and compliance frameworks in enhancing operational outcomes. Conversely, risk monitoring showed a positive but statistically insignificant effect (β = 0.009; p = 0.895), indicating that monitoring alone does not translate into improved performance unless supported by well-enforced control activities. The study concluded that proactive implementation of risk control measures is more influential in driving performance than risk monitoring in isolation. It recommended that insurance firms invest in advanced risk control mechanisms, strengthen compliance structures, and establish clear evaluation metrics to improve the effectiveness of monitoring activities.