EFFECT OF MARKET RISK ON INVESTMENT OF A GENERAL INSURANCE COMPANY IN NIGERIA: A STUDY OF CONSOLIDATED HALLMARK INSURANCE PLC.

Abstract

This study investigated the effect of market risk on the investment of a general insurance company in Nigeria: a study of Consolidated Hallmark Insurance Plc. The specific objectives of the study were to examine the effect of interest rate on the investment income of Consolidated Hallmark Insurance Plc; and to evaluate the effect of foreign exchange rate on investment income of Consolidated Hallmark Insurance Plc. The research design adopted was Ex-post facto design. Two hypotheses formulated were tested using Ordinary least squares statistical technique. It was found that interest rate has no significant effect on investment income of Consolidated Hallmark Insurance Plc. Also, it was found that foreign exchange rate has no significant effect on investment income of Consolidated Hallmark Insurance Plc. Based on the findings of the study it was concluded that market risk, indicated by interest rate risk and foreign exchange rate risk had no significant effect on the investment of Consolidated Hallmark Insurance Plc. In line with the findings of the study it was recommended that insurance firms should therefore ensure proper management of their investments by diversifying in order to mitigate investment risks and increase in investment income to boost performance. In addition, despite the undefined foreign exchange regime and multiple exchange rates in use in Nigeria, which allows abnormal gains from currency variations/mispricing, the insurer should identify a particular exchange rate and conduct its transactions that are foreign exchange related through that rate.