Insurance Sector Development and Carbon Dioxide Emissions in Nigeria

Abstract

In this study, the effect of insurance sector development on carbon dioxide (CO₂) emissions in Nigeria was investigated using annual data for the period 2000 to 2024. The primary objectives were to assess the impact of insurance sector development indicators [insurance penetration (IPE), insurance density (IDE) and insurance premium (GPR)] on CO₂ emissions. Based on the fact that the variables used in the present study were integrated of 1(0) and I(1), the Autoregressive Distributed Lag (ARDL) technique was used to assess the effect of insurance sector development variables on CO₂ emissions while the data were estimated with the aid of Eviews 9.0 econometric software. Findings revealed that insurance penetration (IPE) and insurance density (IDE) has no significant impact on CO₂ emissions both in the short run and long run while Insurance premium (GPR) exerts a significant negative impact on CO₂ emissions in both in the short run and long run. Also, in terms of the control variables, economic growth and FDI exerts a significant negative impact on CO₂ emissions both in the short run and long run while renewable energy consumption (REC) failed the significant test both in the short run and long run. From the findings, this study concludes that insurance sector development plays a significant role in Nigeria's CO₂ emission. This is demonstrated by Insurance premium (GPR) which exerts significant negative impact on CO₂ emissions in both short and long run. The study recommends among others that insurers should explore more green products or sustainability-linked policies. In other words, policies that support green insurance initiatives and investments in low-carbon transition projects should be encouraged. Also, insurers should integrate climate risk assessments into underwriting.

Keywords: Carbon emissions, Green insurance, insurance density, Insurance penetration, ARDL