Research Article
Amenawo Ikpa Offiong, Godwin B
Abstract
Exchange rate volatility and how it affects the banking sector had been studied by several authors with little or no consideration of its effects on the performance of the insurance industry in Nigeria. This study applied the vector error correction model to analyze the long-run effects of exchange rate volatility on insurance performance using insurance penetration and insurance density as measures of insurance performance in Nigeria. The period covered by this study is from 1986 to 2018. Findings showed the presence of a significant and positive long-run impact of exchange rate volatility on insurance performance in Nigeria. With this finding the study recommended that a defined and unified exchange rate regime should be implemented to prevent the insurance sector from making abnormal gains from currency variations/mispricing as this is necessary to build a sector that would be robust enough to absorb any exchange rate volatility that may occur in future.