The Effect of Financial Risk on Performance of Insurance Companies in Ethiopia

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title


Addis Ababa University


The effect of financial risk has been considered to be an important issue on the performance of insurance companies. This study empirically examines the effect of financial risk on performance of insurance companies in Ethiopia and interprets the result by relating with the regulations. The study used balanced panel model in examining the regression model and collect data from eight insurance companies covering the period of sixteen (16) consecutive years, 2000-2015. To this end, the study employed a mixed method research approach by combining documentary analysis and unstructured in-depth interviews. The study used panel data techniques specifically fixed effect model on the regression analysis and used E-view8 software. The study used one dependent variable return on asset (ROA), six independent variables that are credit risk, liquidity risk, reinsurance risk, solvency risk, technical provisions risk and underwriting risk. The regression result show that credit risk, liquidity risk, solvency risk, underwriting risk and technical provisions risk show negative and significant effect at 1% and 5% significance level on performance of insurance companies in Ethiopia, where as reinsurance risk has insignificant effect at 5% significance level on performance of insurance companies. The research concluded that financial risk has significant effect on the performance of Ethiopian insurance companies. Hence, the study recommend in support of each variables for Ethiopian insurance companies to give due attention on financial risk to enhance their performance significantly. Key words: - Insurance, Financial risk and Performance



Insurance; financial risk and Performance