IMPLICATIONS OF CATASTROPHIC BOND AS ALTERNATIVE RISKS TRANSFER SOLUTION ON PERFORMANCE OF MANUFACTURING COMPANIES IN NIGERIA

Common risks such as credit risks, personnel injury, and damage to third party are easily insurable. However, industries are faced with risks that are existential such as terrorist attacks, hurricane, earthquake etc. Clearly, these are outside the conventional risk transfer mechanism of normal insurance of shifting the financial liability of occurrence to a willing party, but in today’s world existential risks are clear and present, hence the need to develop extra-risk transfer mechanism to provide adequate cover. Such mechanisms are non-insurance and are termed Alternative Risk Transfer, ART.The aim of study is to determine impact of Catastrophe bond (CAB) as an alternative risks transfer solutions on the performance of Nigeria manufacturing companies. Based on the responses to the survey, Catastrophe bond (CAB) on one hand and performance of manufacturing in Nigeria on the other, revealed significant correlation between CAB as an ART solution and performance with correlation coefficient (r) of 0.661 with a p-value of 0.000. The ANOVA findings also showed performance of manufacturing enterprises could be strongly be predicted by CAB as well as a positive association between CAB solution and performance of the manufacturing companies. Therefore, we can conclude that there is significant relationship between CAB as an ART solution and the performance of Nigeria manufacturing companies and that CAB do have real impact on the performance of the manufacturing concerns. However, stakeholders such as the Government, the Manufacturers Association of Nigeria (MAN) and Security and Exchange Commission, SEC needs to work together to create enabling environment for ART to thrive by sensitization of the industry on the concept and benefits of ART. Manufacturing companies need to engage risk management experts to understand their exposure to choose effective and appropriate ART strategies, customized to cater to their specific needs and risk profiles, rather than a one-size-fits-all solution.

Keywords: Implications, Alternative, Risk Transfer Solutions, Performance, Manufacturing Companies