Risk Diversification Strategies and Competitive Performance in the Nigerian Insurance Industry
Abstract
This study examined the effect of risk diversification strategies on competitive performance in the Nigerian insurance industry, with specific focus on product diversification, reinsurance utilization, and investment portfolio diversification, while market share growth was used as a proxy for competitive performance. The study adopted an ex post facto research design and utilized annual time series data covering the period 2000 to 2025, giving a total of 26 observations. Data were analyzed using descriptive statistics, Augmented Dickey Fuller and Phillips Perron unit root tests, Johansen cointegration test, and Vector Error Correction Model to capture both short run and long run dynamics. The findings revealed that product diversification has a negative and insignificant effect on market share growth, while reinsurance utilization and investment portfolio diversification have positive but insignificant effects in the short run. However, the error correction term was negative and statistically significant, indicating the existence of a stable long run relationship among the variables and a high speed of adjustment to equilibrium. The study concluded that risk diversification strategies do not significantly influence competitive performance in the short run but are important determinants in the long run. The study recommends that insurance firms should adopt market driven product strategies, optimize reinsurance arrangements, and strengthen long term investment portfolio management to enhance sustainable competitive performance.
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