Determinants of Non-Life Insurance Business Development in Ethiopia

Abstract

This study examines the macro-economic and firm-specific determinants of non-life insurance business development in Ethiopia by adopting quantitative research approach followed by the explanatory research design. The National Bank of Ethiopia and the insurance companies are the sources of data that covers 9 years from the period 2010 to 2019. Twelve insurance companies were selected based on the required data availability for the purpose of this study. Based on the Hausman fixed-random specification test, random effect regression model was employed. This study found that financial development, firm size, and premium growth strongly favor non-life insurance business in Ethiopia. Similarly, GDP growth and trade openness have insignificant and positive effects on non-life business development in Ethiopia. The study, however, confirmed that underwriting risk hinders the development of Ethiopian non-life insurance business. The study also revealed an insignificant negative effects of Leverage on
Ethiopian non-life insurance business development. The study finally suggested the insurance companies should give due attention on underwriting and revisit their sources of finance as leverage hinders their business development.