AN ASSESSMENT OF INVESTMENT PRACTICES IN THE ETHIOPIAN INSURANCE CORPORATION

Abstract

In the context of insurance, much amount which is referred to be premium is accumulated with the aim to fulfill any obligations arising as a result of the contract made between insurers and insured; however, the accumulated idle funds needs to be wisely used to sustain and strengthen the financial position as well as to earn additional income for financial progress. To that end, insurance company is said to be one of the financial investor. The aim of this study is, therefore, to assess this important area of concern taking the investment management practices of the Ethiopian Insurance Corporation (EIC) through examining existing investment framework and tool or measurement techniques adopted by the Corporation. Descriptive type of research was used and data has been collected from primary and secondary sources. Questionnaire and interview was used as instrument for collecting primary data while secondary data was collected from the Corporation’s annual audited report, policies and procedures. The analysis shows that the Corporation has been trying to establish an independently organized investment management function and establish asset liability management committee and put in place policies and limits though they are not effective in dealing with the investment management. Despite the forgoing, the Corporation has weak management information system, lack of the right skill and expertise in the investment areas, strict restriction in the regulatory body, lack of awareness towards the purpose and significance of investment by the boards and there is a problem in controlling and monitoring the investment management. Thus, it is recommended that EIC needs to enhance the quality of its investment in bid to maintain in a diversified manner and ensures its up-to-datedness and implementation while strengthening the monitoring and follow-up activities through strengthen its management information system to generate accurate investment position in timely manner.