Analysis of Loss Reserve Adequacy in Nigerian Non-Life Insurance Companies

This study analyzes the adequacy of loss reserves in Nigerian non-life insurance companies using actuarial development methods applied to loss run data from selected firms over the period 2015 to 2023. Loss reserve adequacy, the extent to which reserves held for incurred but unpaid claims are sufficient to cover ultimate claim settlements, is a fundamental measure of insurance company financial soundness. In Nigeria, concerns about reserve deficiency have been raised by NAICOM examiners and external auditors, yet systematic empirical analysis of reserve development patterns across the industry is absent from academic literature. This study employs the chain-ladder, Bornhuetter-Ferguson, and Cape Cod actuarial development methods to independently estimate ultimate loss projections for motor, fire, and liability insurance classes using loss run data obtained from ten non-life insurance companies. Reserving redundancy or deficiency is assessed by comparing actuarial estimates with reported reserves. The study also examines whether company characteristics including size, ownership structure, and premium growth rate are associated with reserve adequacy patterns. Preliminary findings are expected to identify systematic under-reserving in fast-growing firms and in the motor insurance class. The research recommends mandatory independent actuarial certification of loss reserves and standardized loss run reporting requirements under NAICOM's regulatory framework. Keywords: Loss Reserve Adequacy, Actuarial Methods, Non-Life Insurance, Nigeria, Chain-Ladder Method.