The effect of the IRA investment regulations 2021 on the asset allocation of Uganda non-life insurers: A time series analysis (2004–2024).

Abstract

This study examined the effect of the 2021 Insurance Regulatory Authority (IRA) Investment Regulations on the asset allocation of Uganda's non-life insurance companies over the period 2004–2024. The study focused on three major asset classes: government securities, fixed deposits, and equities. The objective was to determine whether the implementation of the regulations was associated with significant changes in the allocation of insurers' investment funds. The study adopted a time series research design using annual secondary data collected from published financial statements and regulatory reports. Data were analysed using Microsoft Excel and Stata 15. Descriptive statistics were used to summarize the data, while the Shapiro-Wilk test and the Augmented Dickey-Fuller (ADF) test were used to assess normality and stationarity, respectively. Structural stability was examined using the CUSUM test, and dynamic regression models with a regulation dummy variable were estimated to evaluate the effect of the 2021 regulations on asset allocation.The findings showed no statistically significant evidence of a structural break in the allocation of government securities, fixed deposits, or equities during the study period. The regression results also found no statistically significant evidence that the implementation of the 2021 IRA Investment Regulations changed the allocation of funds to any of the three asset classes. However, equity allocation was found to be significantly influenced by the previous year's allocation, suggesting persistence in insurers' investment decisions. The study concluded that there was no statistically significant evidence that the implementation of the 2021 IRA Investment Regulations changed the asset allocation of Uganda's non-life insurance companies over the study period. Future research should consider a longer post-2021 period, include life insurance companies and examine additional factors that may influence insurers' investment decisions.