FACTORS DETERMINING PERFORMANCE OF NON-LIFE INSURANCE BUSINESS IN ETHIOPIA

Abstract

The main objective of this study is to examine factors determining performance of General/Non-life Insurance Companies operating in Ethiopia. As a result, this study adopts Explanatory research method to meet the objective of the study. Data collected from National Bank of Ethiopia (NBE) and nine non-life insurance companies operating in Ethiopia from the period 2003-2017. Furthermore, interview is employed as a tool to collect the primary data to meet objectives of the study. Random effect panel data model is employed to analyze the panel data of the study. The finding of the study indicate that, Company Size, Reinsurance dependence, Loss Ratio, Technical provisions, Gross Domestic Product have statistically significant relation with the performance of General Insurance in Ethiopia, which is measured by Return on Asset. On the other hand, the remaining three variables; namely, Solvency margin, Liquidity and inflations independent variables proved to have statistically insignificant influence on the dependent variable. Furthermore, the findings of the study indicate that Low public awareness, Less accessibility/Urban centered service, Identical products/absence of product differentiation, Existence of price based competition only, Scarce man power, Government intervention through NBE, Unfair playing and Weak cooperation among players in the industry are the major challenges on the performance of non-life/general insurance business in Ethiopia. Based on findings of the study, Ethiopian Non-life Insurance needs to give prime emphasis for their Company Size, Reinsurance dependence, Loss Ratio Technical provisions and Gross Domestic Product because those factors have significant influence on their performance.