Performance Measurement and Incentive Design for Actuarial Teams in Nigerian Insurance Companies

This study examines performance measurement frameworks and incentive structures for actuarial teams in Nigerian insurance companies, assessing their alignment with actuarial professional standards and company financial objectives. Actuarial teams play a critical role in pricing, reserving, risk management, and capital modeling within insurance companies, yet the design of performance metrics and incentives for actuarial professionals has received limited academic attention in the Nigerian context. Poorly designed incentive structures can compromise actuarial independence and create conflicts between professional obligations and organizational pressures. This study uses a survey design, administering questionnaires to 110 qualified and part-qualified actuaries in insurance companies across Lagos, Abuja, and Port Harcourt. Performance metrics in use, incentive structure design, perceptions of independence, and job satisfaction are assessed. Regression analysis identifies the relationship between incentive design quality and perceived actuarial independence. Findings reveal that short-term financial metrics dominate performance evaluation for most Nigerian insurance actuaries, with limited weight given to reserve accuracy, model quality, or professional development outcomes. Actuaries whose compensation is directly linked to underwriting profit reported significantly higher perceived pressure to adjust actuarial assumptions. The study concludes that incentive design for actuarial professionals in Nigeria requires reform to better protect professional independence. It recommends that IFAN develop guidance on appropriate actuarial performance metrics and that boards include reserve development accuracy as a key actuarial team performance indicator.

Keywords: actuarial performance, incentive design, professional independence, insurance companies, Nigeria.