Systemic Risk in Nigeria’s Insurance Sector: Measurement, Transmission, and Macroprudential Policy Implications

This study investigates systemic risk in Nigeria's insurance sector, developing novel measurement methodologies and analyzing the transmission channels through which insurance sector distress can propagate to the broader financial system and real economy. While systemic risk analysis has been extensively applied to banking sectors globally, the systemic risk potential of insurance companies, particularly in the context of their interconnections with capital markets, reinsurance networks, and corporate credit, has received insufficient attention in sub-Saharan African academic literature. This research employs a quantitative financial stability design using daily stock return data for all listed insurance companies on the Nigerian Exchange Group from 2010 to 2023. Systemic risk is measured using the Marginal Expected Shortfall (MES), Systemic Risk Measure (SRISK), and CoVaR methodologies, with comparative analysis of their performance in the Nigerian market context. Dynamic conditional correlation (DCC) GARCH models analyze time-varying return correlations among insurance firms and between the insurance sector and banking, oil and gas, and manufacturing sectors. Network analysis visualizes the interconnectedness of insurance companies through reinsurance and investment linkages. Preliminary findings are expected to identify a small number of systemically important insurance companies whose distress could generate significant negative externalities. The study recommends a macroprudential supervisory framework for systematically important Nigerian insurers under NAICOM and CBN joint oversight. Keywords: Systemic Risk, Insurance Sector, Macroprudential Policy, SRISK, Nigeria.