Insurers manage their risk exposures to maximise profit, improve their underwriting performance and maximise return on assets and shareholders’ funds by retaining a certain proportion of accepted risks. This study used a panel data analysis to examine the relationship between risk retention as a risk financing strategy and the profitability of life insurance firms. This study aims to determine the relationship between the Risk Retention Ratio and the profitability of life insurance companies in Nigeria. An ex-post facto research design was adopted, and cross-sectional data was obtained from eight life insurance companies. Descriptive analysis and inferential statistics were used to test the suitability of the data for the study. Data are further subjected to the fixed effect and random effect regressions. Hausman test was conducted, and the null hypothesis of a random effect model was rejected. The results revealed that the Risk Retention Ratio has a highly positive but insignificant impact on profitability. This implies that factors other than the risk financing strategy adopted by life insurers in Nigeria impact profitability. It is recommended that life insurers should increase the uptake of life insurance and reduce operating expenses. The government should enforce relevant laws on the purchase of life insurance to increase the income generated by insurers and, by extension, their profitability.
Usman et al. (2025) studied this question.