📖 ABSTRACT/OVERVIEW
This study applies actuarial mathematical methods to assess the adequacy of non-life insurance premiums in selected lines of business within the Nigerian insurance market, examining whether premiums currently charged by licensed underwriters are sufficient to cover expected claims costs, expenses, and profit margins over the policy period. Premium inadequacy in the non-life insurance market contributes to the financial instability of insurers, undermines policyholder protection, and threatens the long-term viability of the sector, concerns that have been raised in successive National Insurance Commission supervisory reports. The study focuses on three lines of business, namely motor comprehensive insurance, fire and special perils insurance, and engineering all-risks insurance, using premium and claims data submitted to the National Insurance Commission by twelve medium and large insurance companies for the period 2019 to 2023. The loss ratio, combined ratio, and burning cost methods are applied to assess premium adequacy at the market and firm levels, and chain ladder development techniques are used to project incurred but not reported claims reserves. A credibility-weighted pure premium model is developed to estimate adequate premium rates for each line of business, and results are compared against gazetted minimum premium rates. Results indicate persistent loss ratio deterioration in motor comprehensive insurance, suggesting that current premium rates are inadequate relative to observed claims experience. Keywords: actuarial mathematics, premium adequacy, non-life insurance, loss ratio, Nigerian insurance
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