Asset-Liability Management Challenges in Nigerian Life Insurance Companies

This study examines asset-liability management challenges faced by life insurance companies in Nigeria, focusing on the duration mismatch between long-duration policy liabilities and available investment assets. Effective ALM is a core actuarial and finance function that ensures insurers can meet policyholder obligations as they fall due while maintaining adequate investment returns. In Nigeria, the shallow domestic capital market and limited supply of long-duration fixed income securities create structural ALM challenges for life insurers with endowment and annuity portfolios. This study uses a descriptive research design and collects data from interviews with 40 investment and actuarial managers in 12 life insurance companies alongside analysis of investment portfolio disclosures from annual reports for 2019 to 2023. Duration gap analysis is conducted to quantify the mismatch between asset and liability durations for each sampled company. Findings reveal that the average duration gap in the sampled life insurers is approximately 4.2 years, with liabilities materially longer than available investment assets. This gap exposes insurers to reinvestment risk and limits the accuracy of their reserve adequacy under rising rate scenarios. The study concludes that structural limitations in Nigeria's debt capital market are the primary driver of ALM challenges for life insurers. It recommends that the Debt Management Office develop longer-tenor federal government bonds specifically to support insurance sector investment demand and reduce systemic duration mismatches.

Keywords: asset-liability management, life insurance, duration mismatch, investment risk, Nigerian capital market.