Factors Influencing Demand for Reinsurance in Ethiopian Insurance Companies
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Date
2018-01
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Addis Ababa University
Abstract
Reinsurance plays a critical role in the proper functioning of a stable insurance market. This
study aims to investigate the relationship that exists between insurer specific factors and
reinsurance demand in the Ethiopian insurance companies. In order to achieve this objective,
eight non-life insurance companies were selected for the period of 2005 to 2016. Five hypotheses
were formulated and tested using regression analyses, applying explanatory research design and
quantitative research approach. The study relied on secondary data extracted from the audited
financial statements of the selected insurers. Financial leverage, underwriting risk, firm size,
return on asset and asset volatility were taken as independent variables while reinsurance
demand was taken as dependent variable being represented by the firms reinsurance ratio. The
result of the fixed effect regression model indicated that a strong positive significant relationship
exists among financial leverage with reinsurance demand and asset volatility to reinsurance
demand. And also significant negative relationship exists between firms’ size and reinsurance
demand. The study delivers evidence that financial leverage, total asset volatility and
underwriting risk are the most important factors that affect demand for reinsurance in Ethiopian
insurance companies. On the basis of these findings, the researcher suggests that Ethiopian
insurers should give more attention for these factors whenever they arrange reinsurance
agreements.
Description
A thesis submitted to the department of accounting and
Finance (A.A.U) in partial fulfillment for the requirement of
The degree of Master of Science in accounting & finance
Keywords
Insurer, Reinsurer, Reinsurance demand