Abstract
This study aimed to review the extant literature on the impact of Risk-based Capital (RBC) on development of insurance companies in Nigeria. The concept of Risk-based Capital (RBC) was examined and its importance was also highlighted. The study showed that the use of the conventional proxies for the measurement of capital structure does not adequately explain the insurer’s capital structure, as the non-interest-bearing liabilities, which opportunity costs plays significant role in insurer’s cost of capital, are excluded. The use of debt ratio as proxy for capital structure is inappropriate; in its place technical provision ratio should be used in order to take into consideration the opportunity costs of the non-interest-bearing liabilities such as unpaid claims, creditors and accruals. Further studies should be carried out to empirically test the effect of RBC on performance of insurance companies in Nigeria.
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