An Evaluation of Financial Health of Non-Life Insurance Companies from Developing Countries: The Case of Ghana

22 Pages Posted: 1 Jul 2008  

Samuel Nana Yaw Simpson

University of Ghana - Business School

Obi Berko Obeng Damoah

University of Ghana

Date Written: May 28, 2008

Abstract

The paper seeks to shed light on the contention regarding ascertaining the financial soundness of insurance companies using a developing country as the context. It examines the current model being used by the Ghanaian regulatory and supervisory body (the National Insurance Commission, NIC) on non-life insurance companies in Ghana and compares it with the CARAMELS model including other rival theories in determining the financial health of non-life insurance companies in Ghana.

The motivation of the study was that the unique format of insurance companies' financials does not lend itself to traditional financial accounting analysis. Besides, assessing financial soundness in the insurance industry is a complex task since the overall financial position of an insurance company depends on many factors, some of which are difficult to quantify. Though, recommendations as well as conclusions from past studies concerning the financial health on insurance companies are mixed, results from the study suggest that, the framework being used currently by NIC on the financial health of non-life insurance companies is not comprehensive enough to give early warnings to the industry's stakeholders and that the CARAMELS model as proposed by other authors fits the Ghanaian context and helps to bring to the fore, the generally accepted insurance core principles in the financial behaviour of non-life insurance companies in Ghana.

Suggested Citation

Simpson, Samuel Nana Yaw and Damoah, Obi Berko Obeng, An Evaluation of Financial Health of Non-Life Insurance Companies from Developing Countries: The Case of Ghana (May 28, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1138338 or http://dx.doi.org/10.2139/ssrn.1138338

Samuel Nana Yaw Simpson (Contact Author)

University of Ghana - Business School ( email )

P.O. Box LG 78
Legon
Accra, Greater Accra LG 78
Ghana

Obi Berko Obeng Damoah

University of Ghana

PO Box 25
Legon, Accra LG
Ghana

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