Insurance Industry Investments in Nigeria and Liquidity Risks

This study was on insurance industry investments in Nigeria and liquidity risks. The specific objectives of the study are to assess the effect of Liquidity risk on Insurance industry investments in Policy loans in Nigeria; to ascertain the effect of Liquidity risk on Insurance industry investments in Bills of Exchange in Nigeria; and to determine the effect of Liquidity risk on insurance industry investments in real estate and mortgage. The design adopted for this study is the Ex-post facto research design. Secondary data were sourced from the Central Bank of Nigeria Statistical Bulletin and Nigerian Insurers Association Annual publications of various years. Ordinary Least Square Regression was used to test the three hypotheses formulated. It was found that liquidity risk has a negative and significant effect on the Nigerian insurance industry investments in policy loan. Also, it was found that liquidity risk has a negative and significant effect on the Nigerian insurance industry investments in bills of exchange. Finally, it was established that liquidity risk has a positive and insignificant effect on the Nigerian insurance industry investments in real estate and mortgage. Based on the findings of the study it was concluded that liquidity risks of the insurance industry is less pronounced in the insurance industry's transactions in Real estate and mortgage. On the other hand, it is more pronounced in relation to its investments in Policy loans and Bill of Exchange. Thereafter, it was recommended that a benchmark should be set to determine the amount of Policy loans an insurance company can give out on a quarterly or annual basis. This will ensure that the industry becomes wary of exceeding it capacity at a given period. Also, each insurance company should respectively put in place a check means that watches against the distribution (amount) of its Bill of Exchange investments against the likely to occur exposures.