Behavioural Analysis of Insurance Companies in Real Estate Investment in Nigeria

Abstract

Insurance companies play two major roles in the economy. First is providing indemnification and second is institutional investment. This study’s focus is on the latter role in Nigeria. The study examined the perception of insurance companies about real asset in their portfolio and factors that influence investment in the asset. Structured questionnaires were distributed to fifty-two insurance companies in Lagos State. Data collected were presented in tables and analysed with statistical tools such as percentages, mean and relative importance index for ease of understanding. It was found that capital security and portfolio stability (diversification) were the principal driving motive for investing in real estate while liquidity concern, high transaction costs, inadequate infrastructure development in the country and unreliable valuation data among others constitute major factors militating against investment in real estate. It was further found that investment in real estate is currently far below what the law stipulates in Nigeria. The paper therefore concludes by suggesting that insurance companies need to see real estate as attractive investment asset and invest in creating comprehensive real estate submarket rather than cherry-pick manner investment in properties.

Keywords: Behaviour, Insurance Companies, Real Estate, Investment, Portfolio, Institutional Investors