CHAPTER ONE

Introduction
1.1 Background to the Study

Risk management is a security function among the six basic functions of a business firm. Risk

management is a specialized aspect of the overall financial management of an enterprise whose

objectives must be consistent with the financial objectives and as in other financial management

problems, alternatives are evaluated by considering their potential financial advantages and risks.

A generally accepted description of risk management is that: risk management is a systematic

approach to setting the best course of action under uncertainty by identifying, assessing,

understanding, acting on and communicating risk issues. Fundamental to this review is the

definition by Wiegelmann – “Risk management is a structured and disciplined approach that

aligns strategy, processes, people, technology and knowledge with the purpose of evaluating and

managing the uncertainties a real estate development organization.

Risk management in itself has some stated and quiet important processes which includes;

identification of the risk, Assessment of the risk, the controlling of the risk, and finally the

review of the control. Risk factors could be identified using a qualitative or quantitative

approach. Also, there are common risk identification techniques which are interviews,

brainstorming, checklist, stakeholder analysis, cause-and-effect diagram, and a SWOT analysis

(Gehner, 2008). Many methods have been suggested in property development literature for

effective project risk management (Khumpaisal and Chen, 2009). Risk identification establishes

the basis for risk analysis, risk response and risk control.

Property development is a multifaceted, dynamic and risky enterprise. Property development

projects are fraught with risks and uncertainties spanning through the stages of the development
process. Risk and uncertainty, if not well managed, could have harmful impacts on development

project by affecting time, quality, and cost of such project. In Nigeria, evidences abound of

property development failures and abandonments with the attendant social, environmental and

economic consequences.

According to Ratcliff and Stubbs (1996), “risk is the very business of property development, and

uncertainty the prevailing climate within which development takes place.” The seven key

features which define complexity in development process are; property markets, long-term

trends, the event sequence, economy, actors, the site and government (Fisher, 2005). There are

numerous risk factors that have been identified in property development literature. According to

Loizou and French (2012), the main sources of development risk are; land cost, financial,

construction, socioeconomic, and sale/rents. Risk and uncertainty, if not well managed, could

have harmful impacts on development project by affecting time, cost, and quality of such project

with the attendant economic, social, and environmental consequences. Lately, risk management

has moved to another level of importance due to the increased complexity and unpredictability in

the development environment, and above all after the commencement of the global financial

crisis (Doner, 2010); hence the need to apply robust and sophisticated risk management

techniques in property development projects. Despite the fact that property development

companies are considered to be the greatest risk-takers (Byrne & Cadman, 1984), the industry

falls behind other industries in its application of sophisticated techniques in risk identification,

risk evaluation, mitigation and control. Wilkinson and Reed (2008) assert that “Developers are

often criticized for not sufficiently understanding and analyzing risk.” The finance, insurance and

banking sectors have since developed and employed sophisticated risk management techniques

and methods and the quantum of research in these areas are too many to list.
However, it has been established that research into property development risk is limited

(Whipple, 2008). In most studies in property development, approaches to risk concentrate on

evaluating property development risk without highlighting key risk factors in the development

process. These approaches largely concentrate on feasibility and/or cash flow analyses (Byrne,

1996); giving limited attention to property development risk management process.

The implication of this development need not be overstressed as evident in the global economic

collapses engendered by property market failures. Today, property development decision-making

is increasingly challenging. Decisions are made under societal conditions characterized by large

uncertainties and emergence risks. Consequently, risk analysis and management need balancing

of the different risk management strategies with robust and adaptive methods (SRA, 2015).

In Nigeria, evidences abound of property development failures and abandonments with the

attendant social, environmental and economic consequences. Development projects are

abandoned before completion or completed projects are not disposed over six months. In other

cases, completed projects are foreclosed by development lenders due to inability of the

developers to service their loans; thus, leading to financial distress and ruination. Therefore, one

question that agitates the mind is; do property development companies in Nigeria apply robust

and sophisticated risk management techniques in the evaluation of property development

projects? Following this query, the paper aims to review literature and previous research on

application of risk management techniques by property development industry with a view to

identify knowledge gaps and recommend future research areas in Nigeria. This paper adopts

various sources of information such as textbooks, journal articles, reports, masters’ dissertations

and doctoral theses relevant to the study. The following main concepts will be looked-into: risk

conceptualization; risk analysis and management; the property development process; an

overview of property development in Nigeria; application of risk management techniques; and

the future of risk management in property development projects.

Businesses and society cannot operate without the services of commercial property, including the

provision of shops, offices, factories, housing and many other types of property (EPRA and

INREV, 2012). Mouzughi, et al., (2014), states that property is defined as; “The economy’s stock

of buildings, the land on which they are built, and all vacant land. These buildings are used either

by firms, government, non-profit organizations and so on, as workplaces, or by households as

places of residence.” In line with the above definition, it could be deduced that property make up

the largest single composition of a nation’s assets, which combined with its financial assets

constitute the gross assets of a national wealth (FRBSF, 2000), hence has a substantial bearing

on a nation’s economy and its development. Property development plays a very crucial role in

the Nigerian property industry and economy.

1.2 Statement of the Problem

Property development is a multifaceted, dynamic and risky enterprise (Gehner, 2008). Property

development projects are fraught with risks and uncertainties spanning through the stages of the

development process. According to Loizou and French (2012), risk and uncertainty, if not well

managed, could have harmful impacts on development project by affecting time, quality, and

cost of such project. In Nigeria, evidences abound of property development failures and

abandonments with the attendant social, environmental and economic consequences.

Development projects are abandoned before completion or completed projects are not disposed

over six months (Doner, 2010). In other cases, completed projects are repossessed by

development lenders due to inability of the developers to service their loans. These problems

could be attributed to development companies not employing formal strategic risk management

in project evaluation. The complexity and uncertainty in property development have increased as
a result of several trends; consequently, risk management has become more important.

Regrettably, the property industry lags behind other industries in the application of sophisticated

risk management techniques as a result of lack of apt in research and development by the

industry (SRA, 2015). Overall, property developers predominantly handle risk management in a

subjective manner – using experience and ‘gut feeling’ followed by DCF models, sensitivity

analysis and scenario analyses; while simulation-bases approaches are seldom used or not

applied at all as in the case of Nigeria. The continuous application of these approaches will

continue to negatively impact property development leading to development failure and financial

distress.

Finally, it has come to the researcher’s notice that this research topic which specifically tries to

access insurance as a risk management option in property development in Nigeria and Enugu

state specifically has had less research work carried out in this area in Nigeria. And therefore, the

researcher tries to look into this research topic with in-depth and coordinated effort. The

researcher seeing that much work is yet to be done in this area especially within Nigeria, put in

extra effort in getting result as to how insurance could be some sought of solution to the issues of

property development in the country and Lagos state in particular.

1.3 Objectives of the Study

The overall objective of this study is assessing how the use of insurance as risk management tool

has helped in improving the business performances of property development in Enugu state.

However, specific objectives include;

1. To evaluate the possible contribution of insurance industry towards risk improvement and

loss prevention/reduction in real estate industry and specifically in property development.

 2. To assess the performance of Nigeria insurance industry in real estate sector particularly

in property development

3. To examine the challenges facing Nigeria insurance industry in the management of risk

exposed to real estate sector especially in property development.

1.4 Research Questions

1. to what level has the insurance sector as a risk management tool in the economy aide in

risk improvement and loss reduction in property development?

2. to what extent has the insurance sector as a risk mitigating instrument performed in the

real estate sector in facilitating property development in Enugu state?

3. are there any challenges or problems faced by the insurance industry in the management

of risk exposed to property development firms in Enugu state?

1.5 Research Hypothesis

H1: the insurance sector as a risk management tool has aided risk improvement and loss

reduction in property development in Nigeria and Enugu state especially.

H1: the insurance sector of the economy as a risk mitigating instrument has performed well in

facilitating property development in Enugu state.

H1: there are challenges being faced by the insurance industry in the management of risk

exposed to property development firms in Enugu state.

1.6 Scope and limitations of the study

The study tries to assess the effect of insurance as a risk management tool on the performance of

real estate sector (property development) in Lagos state. For the study, few selected famous/well-

known real estate companies in Enugu metro were used as a case study due to the fact that the
researcher lacks all of the necessary resources to be utilized in obtaining information relating to

the topic from the entire real estate companies in Enugu state and also due to the fact that the

program is time-bound.

1.7 Significance of the Study

The study will be significant to the following group of people;

1. The government: the state government can use the findings of the study for formulation

of policies that will help improve the performances of the real-estate sector (property

development businesses) in Enugu state by advising them to adopt insurance into their

business practices for the efficient and effective mitigation and reduction in the various

risks faced in this business sector.

2. Management property development enterprises: the findings of the study will also be

relevant to managements of real estate organizations and companies in decision making

as to the full adoption of insurance policies in the businesses practices or in their business

processes which in most times turns out to be invaluable.

3. The researcher: The study will be of significance to the researcher as it will improve his

knowledge and is a major requirement for the award of bachelor’s degree in estate

management.

1.8 Operational Definition of Terms

1. Insurance: this is an undertaking by a company, business or individual to provide safe

against loss in return for regular payment.

2. Insurance Business: this is the process of buying and selling of insurance services
3. Proposal Form: This is the printed form which the prospective insured fills out stating

the risks which he wants covered and providing the necessary information.

4. Insurer: this is the insurance company which is covering a particular risk.

5. Risk Management: this encompasses the identification, analysis, and response to risk

factors that form part of the life of a business. Its effectiveness offers the potential to

reduce both the possibility of a risk occurring and its potential impact.

6. Risk Assessment: this is a terminology which explains the evaluation and the

examination of the potential risks embodied with a particular property or some groups of

properties at a particular point in time. They are also extremely useful in determining the

way to handle the situation. Risk assessment aims to determine how serious a hazard is

and whether individuals or the society should be exposed to it.

7. Risk Measurement: this means measuring the potential size of the loss and the

probability that it is likely to occur.

8. Property Development: property development is ‘a process that involves changing or

intensifying the use of land to produce buildings for occupation’. It is not the buying and

selling of land for a profit; land is only one of the raw materials used.
 REFERENCES

Akintoye, A.S. and MacLeod, M.J. (1997). Risk analysis and management in construction,
International Journal of Project Management, 15(1), pp 31-38.

Baker, S., Ponniah, D. and Smith, S. (1999). Risk response techniques employed currently for
major projects, Construction Management and Economics, 17(2), pp 205-213.

Birrell, G. and Gao, S.B. (1997). The UK property development process: its phases and their
degree of importance to profitability. RICS Cutting Edge Conference, Dublin, RICS
Foundation, pp 1-23.

Byrne, P. and Cadman, D. (1984). Risk, uncertainty, and decision-making in property

development Spon, London.

Cadman, D. and Austin-Crowe, L. (1991). Property development (3rd edition), E. & F.N. Spon,
Londen.

Cooper, D.F. and Chapman, C.B. (1987). Risk analysis for large projects (Models, Methods &
Cases) John Wiley & Sons, Chichester.

Fisher, P. (2005). The property development process; Case studies from Grainger Town,
Property Management, 23(3), pp 158-175.

Miles, M.E., Berens, G. and Weiss, M.A. (2000). Real Estate Development: Principles and
Process (third), ULI - the Urban Land Institute, Washington D.C.

Miller, R. and Lessard, D. (2001). Understanding and managing risks in large engineering
projects, International Journal of Project Management, 19(8), pp 437-443.
 CHAPTER TWO

Review of Related Literature

2.1 Conceptual Review

2.1.1 The Definition and Concept of Insurance:

Oke (2012), opined that insurance is designed to protect the financial wellbeing of an individual,

company or other entity in case of unexpected loss. According to him, some forms of insurance

are required by law; while others are optional. Agreeing to the terms of an insurance policy

creates a contract between the insurer and the insured. Insurance involved the transfer of risk

from one individual to another, sharing losses on an equitable basis by all members of the group

(Gollier, 2013). The group, known as insurance company, must increase its hold on the premium

and widen its profit margin to cope with the demand of their customer.

Insurance keeps assets and life under guarantee. Insurance plays a great role both in developed

and developing countries' economies. Insurance provides safety and security: Insurance always

provides financial support and decreases dangers in economic and social life. For example, we

can say that in the case of life insurance financial assistance guarantee to the family of the

insured on his death: Insurance makes financial resources: As economic category insurance,

which is part of the financial system, is the foundation and utilization process of the targeted

finance funds established to eliminate the damage from the sudden accidents and emergency, to

provide financial support to the citizens in the accidents connected with their private lives (des

Assurances, 2007). Insurance always protects people from loss, from danger. Many people know

that danger can occur every time. For this reason, a person, which wants to ensure his property,

pays some insurance premium to the insurance company.

2.1.2 Real Estate Development:

‘Real estate development is a business with diverse spheres of dealings or areas of undertakings,

encompassing activities that range from the renovation and re-lease of existing buildings to the

purchase of raw land and the sale of improved parcels to others. Developers are the coordinators

of those activities, converting ideas on paper into real property’ (Peiser and Frej, 2003). The

process through which this objective can be realized is described in general terms of the process,

actors involved, and functional types of developments by several authors (Birrell and Gao,

2017). Fisher (2015) contributes to the theory of real estate development by presenting seven

major elements that define the complexity of the process; long-term trends, the economy,

property markets, actors, government, the site and the events-sequence. In addition to these

elements, Gehner (2015) mentions the unique character, the sensitivity to contexts and the life

time of real estate as reasons for complexity and riskiness of real estate development.

A specific focus on risk analysis comes from Miles and Wurtzebach (2017) and Gehner (2013)

who both propose a risk analysis framework exclusively adjusted to the real estate development

process. Their research mainly focuses on the techniques of risk analysis in order to evaluate

risks. However, the relationship with the next step of the risk management cycle is

underexposed, whereas the applicability of the risk analysis is determined by the extent the risk

analysis either supports decision-making or the daily project management practice. The

individual and organizational aspects of risk management must be taken into consideration.

2.1.3 Challenges/Problems of Insurance Industry in Nigeria

As a multi-billion-naira industry that concerns itself with security for personal and corporate

establishments, replacement and protection or indemnification against future loss, the need to

deepen and enrich knowledge on property owners' awareness and the causes of their developing

apathy towards property insurance, as well as the attention attached to its operation, cannot be
overemphasis. Furthermore, the real estate investment and insurance industry are two formidable

subsectors if adequately explored. Both sectors could enhance speedy economic recovery and

infrastructure development and serve as a tonic for the modern-day economy revitalization

and proper functioning. However, Ujunwa and Modebe (2011) asserted that the operations of

insurance businesses in Nigeria had faced numerous challenges: the prevailing clients'

lackadaisical attitude towards insurance companies' services, unfavourable macroeconomic

environment and market suspicion of insurance companies and ineffective regulatory policy

framework. Usman (2009) evaluated the market performance of the insurance market in Nigeria.

The study revealed that the low Nigerian insurance companies' attitude towards claims settlement

coupled with multiple products and branches are the primary reasons for the market failure.

Olaleye and Adegoke (2009) studied the homeowners' perception of real estate development

insurance in Lagos, Nigeria. The study found that homeowners' lukewarm attitude and the lack

of insurance culture was meaningfully associated with their educational qualifications. It thus

concluded that homeowners' low income, educational qualification and awareness levels affect

their inclination towards property insurance. However, the Nigeria low insurance patronage has

been attached to lack of awareness, trust, delay in claim payment to genuine claimants, poor

education, underwriters' fraudulent actions, and over-dependence on overseas underwriters

(Ebitu et al, 2012). Okechukwu (2016) observed that even the very few Nigerians who take up

genuine insurance policies find it difficult to file for a claim in the event of perils, and the

insignificant numbers that file for claims are either underpaid or not settled. The occurrence of

this nature exacerbates distrust resulting in low attentions and activities in the insurance industry.

To tackle these challenges other studies were carried out for instance Njungbwen and Oke (2019)

opined that insurance valuation helps resolve the problem of premium settlement for both the

assured and the underwriter in an insurance contract as fair premium is arrived at to profit the
business and its continuity. They also argued that it ensures continuous funds for claim

settlement, preventing under-insurance and advocating full value insurance. Despite various

issues and challenges faced by the insurance firms, if well tackled well, the workings of both

entities could contribute tremendously to the economic growth of the country invaluably. Just as

by Ujunwa in Okechukwu (2016) opined that the insurance company is a vital component of a

nations' financial intermediation chain that ensures financial security and offers an organized

source of long-term investment capital for infrastructural project development.

2.1.4 Insurance as Risk Management Tool in Real Estate Business

The Nigeria real property investment market is currently bursting with risk and uncertainty, but

investors in the market show little or no concern about protecting their investment against perils

despite its capital intensiveness. The frequent occurrences of perils, the undefinable and frenzied

economic policies resulting in the current hyper-inflationary trend and precarious investment

decision have recently become topical issues in the African Sub-region. The unstable political

and economic climate have affected virtually every sector of the national economy for which real

estate as an investment option is not left out.

Oloke, Durodola and Emeghe, (2015) observed that real estate investment project

consummation is subjected to stages of intrigues of various stakeholders' decision-making. The

primary aim of every investor is the achievement of the investment goal with minimal risk.

Though nobody plans or wish to lose property or investment, this occurs now and then. Since the

underlying purpose of any investment is to attain its set objectives or goals that could be

financial, social, prestige or political, that must be achieved with there is a need for the insurance

industries' involvement to cover against risk. The two primary ways for asset insurance in

Nigeria are the open and named perils; hence the policy a real estate owner takes must falls

within the ambit of either of the two. Ujunwa in Okechukwu (2016) opined that the insurance
company is a vital component of a nations' financial intermediation chain that ensures financial

security and offers an organised source of long-term investment capital for infrastructural project

development. Thus, the real estate investment and insurance industry are two formidable

subsectors if adequately explored. Both sectors could enhance speedy economic recovery and

infrastructure development and serve as a tonic for the modern-day economy revitalization and

proper functioning.

2.1.5 Performances of the insurance sector in Real Estate Businesses in Nigeria

Insurance markets unlock opportunities for economic growth. As documented by Chamberlain et

al., (2017), insurance markets contribute to economic growth and development through two

primary avenues: by supporting risk management and through capital intermediation. However,

this link is not automatic. The actual roles will differ per country, depending on the

macroeconomic and political economy context and the stages of development of the insurance

market. Where the insurance market intersects with a particular value chain (like the property

market), the state of development of that particular value chain also affects the role that

insurance can fulfil in practice. Below, we take a closer look at the role insurance have played

which brings its performances in the real estate sector to light: 1.) Insurance markets has enabled

risk management and productive risk-taking in the Nigerian real estate sector. In preparing for

risk, economic actors may elect to acquire knowledge to understand risk exposures, obtain

protection to mitigate potential losses or transfer the risk to those best suited to manage it (like

insurers). The transfer of risks to insurers provides economic agents with a more stable basis for

planning (Kessler et al., 2016). This promotes entrepreneurial activity and all-round

performances of the business sector by allowing the firms and individuals in real estate to focus

on their core activities which contributes to the greater performances of the firm. In the property

market, this means that insurance can enhance the willingness of property market actors to
undertake risky ventures, while protecting innovators and investors from shocks. In addition to

risk transfer, insurance markets also promote more proactive risk management. This consists of

knowledge generation, preparation, risk reduction and coping (World Bank, 2013). Insurers do

so by collecting information and by providing loss prevention, safety and risk management

advice and services to customers. For instance, insurers can require fire extinguishers and fire

drills on building sites. 2.) Insurance markets mobilise, pool and intermediate capital. Insurance

companies accumulate large amounts of premiums, which are paid in advance (Gupta, 2014). In

the case of long-term insurance policies, premium income is available for investment over long

time horizons. Insurers also generate funds from investment income and maturing investments

that need to be reinvested. Insurers are responsible for preserving the long-term value of their

assets to meet their long-term liabilities as they fall due. Thus, by investing their assets, insurers

mobilise and pool capital and intermediate it by investing in economic activities.

2.2.1 Theoretical Framework

2.2.2 Agency Theory:

Agency theory extends the analysis of the firm to include separation of ownership and control,

and managerial motivation. In the field of corporate risk management agency issues have been

shown to influence managerial attitudes toward risk taking and hedging (Smith and Stulz, 1985).

Theory also explains a possible mismatch of interest between shareholders, management and

debt holders due to asymmetries in earning distribution, which can result in the firm taking too

much risk or not engaging in positive net value projects (Mayers and Smith, 1987).

Consequently, agency theory implies that defined hedging policies can have important influence

on firm value (Fite and Pfleiderer, 1995). Agency theory provides strong support for hedging as

a response to mismatch between managerial incentives and shareholder interests. The following

hypotheses are designed to test the basic implications of this theory.

2.2.2 New Institutional Economics Theory:

A different perspective on risk management is offered by new institutional economics. The focus

is shifted here to governance processes and socioeconomic institutions that guide these

processes, as explained by Williamson (1998). Although no empirical studies of new institutional

economics

approach to risk management have been carried out so far, the theory offers an alternative

explanation of corporate behavior. Namely, it predicts that risk management practices may be

determisned by institutions or accepted practice within a market or industry.

Moreover, the theory links security with specific assets purchase (Williamson, 1987), which

implies that risk management can be important in contracts which bind two sides without

allowing

diversification, such as large financing contract or close cooperation within a supply chain. If

institutional factors do play an important role in hedging, this should be observable in the data.

First of all, there may be a difference between sectors. Secondly, hedging may be more popular

in

certain periods – in Poland one might venture a guess, that hedging should become more popular

with years. A more concrete implication of this theory, is that shareholders may be interested in

attracting block ownership by reducing company risk.

2.2.3 Stakeholder Theory:

The stakeholders' thesis, which R.E. Freeman proposed, has drawn a lot of attention to business

ethics (Freeman, 1984). According to the stakeholder theory, "any group or individual who may

or may not be affected by the achievement of an organization" (Lüdeke-Freund and Schaltegger,

2020) should have a voice in decision-making and reap the rewards of labor. According to the

stakeholder theory, companies should try to increase shareholder wealth to outperform rivals
(Rosyadi et al., 2020). According to the stakeholder theory, it is required that the needs of the

shareholders be taken into account, but it is also emphasized that they must not merely

concentrate all of their attention on the shareholders (Freeman, 1984). Since a firm will never

function on its own, a growing network should be viewed as an essential component of the

organization. As a result, sustainable manufacturing demands that its corporate operations reflect

a culture that integrates the environment, social systems, and economic systems (Muhamad and

Ebrahim, 2018). With regard to the environment, the economy, and social structures, the business

should take into account its suppliers, consumers, customers, and employees as their significant

stakeholders (Hami et al., 2018).

2.2.4 Portfolio Theory:

Portfolio theory being originally developed by Harry Markovitz in the early 1950's, Portfolio

Theory - sometimes referred to as Modern Portfolio Theory - provides a mathematical

framework in which investors can minimize risk and maximize returns. The central plank of the

theory is that diversifying holdings can reduce risk, and that returns are a function of expected

risk (Portfolio theory, 2007). The key result in portfolio theory is that the volatility of a portfolio

is less than the weighted average of the volatilities of the securities it contains (Portfolio theory,

2006). The volatility is the standard deviation of expected return on a security. The volatility

therefore changes with the period of times over which it is measured (Volatility, 2007). The

expected return on most investments is uncertain, however it is possible to describe the future

returns statistically as a probability distribution (Expected return, 2007). An efficient portfolio is

one that lies on the efficient frontier (Efficient portfolio, 2007).

The efficient frontier describes the relationship between the return that can be expected from a

portfolio and the riskiness of the portfolio. It can be drawn as a curve on a graph of risk against

expected return of a portfolio. The efficient frontier gives the best return that can be expected for
a given level of risk or the lowest level of risk needed to achieve a given expected rate of return

(Efficient frontier, 2007). An efficient portfolio provides the lowest level of risk possible for a

given level of expected return. If a portfolio is efficient, then it is not possible to construct a

portfolio with the same, or a better level, of expected return and a lower volatility. An efficient

portfolio also provides the best returns achievable for a given level of risk. If a portfolio is

efficient, it is not possible to construct a portfolio with a higher expected return and the same or a

lower level of volatility with the securities available in the market, which excludes risk free

assets (Efficient portfolio, 2007). Investors can reduce risk, and improve the level of risk relative

to return, by diversifying their portfolios. The key to diversification is to choose investments

whose prices are not strongly correlated. Firstly, investing in different sectors, geographical

regions and classes of security improves diversification: the values of shares, bonds and pieces of

real estate will be more correlated with each other than with investments of completely different

types (Diversification, 2007).

2.3 Empirical Review

Lyndon's (2019), study explored the relationship between Nigeria's insurance industry and

economic growth from 2001 to 2017. This study used descriptive stats and multiple regression

for analysis. Insurance investment, premium, and claims positively impacted GDP. The

insurance sector has greatly aided Nigeria's economic advancement. Mandatory insurance

policies recommended for individuals and businesses. Encourages investment, protects investors,

promotes steady growth. Regulators should enforce transparent fund management by insurers.

Insurers should diversify investments to boost returns and pay claims.

Nwanli and Omankhanlen (2019), analyzed insurance receivables' impact on Nigerian economic

growth from 2008-2017. This study used panel data analysis to investigate the correlation
between insurance industry indicators (life premium, non-life premium, and insurance

investment) and economic growth. The study showed that life premium and economic growth

related positively yet insignificantly, and non-life premium related negatively but insignificantly

with economic growth. Insurance investment had no effect on economic growth. Nigerian

insurance industry has little impact on economy. Policy makers should tackle insurance industry

challenges from government and public. With policies and awareness, the industry can achieve

its potential.

Chizoba et al. (2018), studied the effect of inflation on insurance penetration in Nigeria from

1985 to 2016. Study used regression analysis and found inflation has a small positive impact on

insurance penetration in Nigeria. The study recommends measures to reduce inflation in Nigeria,

which will increase insurance penetration in the industry.

Adedokun, Nwude, and Sergius (2018), linked insurance and economic growth in Nigeria from

1996 to 2015. This study used OLS estimation. Insurance in Nigeria boosts economic growth.

Gov't should boost insurance industry with economic policies. Enforce insurances, enhance

industry reputation with education campaigns.

Romeli, Halil, Ismail and Shukor (2016), investigated the economic challenges in joint ventures

infrastructure projects. The study categorized economic challenges as joint ventures into internal

and external challenges. The study adopted quantitative method of research. Findings from the

study revealed that the critical internal economic challenge is vague financial documentation and

the critical economic challenge is legal conditions. The paper encouraged the joint venture

company to implement the post counteractive act plan as an innovative business tactic to

continue the joint venture’s survival to augment the quality of life among contractors that execute

joint venture.
 Gap in Literature

In the process of carrying out this research work, we found out that the research in relation to

insurance has less work carried out on it and the little that were carried out where in other

countries of the world and not Nigeria. Mostly in the USA and European nations. Due to this fact

we have chosen to engage in this academic adventure to bring out the light and the need for the

real estate businesses adopting insurance as a critical measure in tackling the various risks

associated with the business.

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1131.
 CHAPTER THREE
Research Design and Methodology

3.1 Introduction

This chapter details the various methods, techniques and the procedures adopted by the

researcher in the process of carrying out the study. It entails the research design, sources of data,

population of the study, sample size determination and sampling technique, reliability and

validity of data and analytical tools.

3.2 Research Design

For this study, a Google form was used to administer an online descriptive survey. The

quantitative structure of online survey research makes it useful for gathering, organizing, and

analyzing data (De Vaus, 2013). The lack of time restrictions for participants, minimal cost, and

flexibility in data collecting are all benefits (Wimmer and Dominick, 2014). Quantitative online

survey research has been helpful for academics looking for specific forms of factual, descriptive

information (De Vaus, 2013). The fact that the study collects both factual data and respondents'

opinions—leading to the determination of the correlations among the specified variables—

informs the researcher's usage of the survey method.

3.3 Sources of Data

In order to acquire the data for this study, both primary and secondary sources were used.

Together, these two sources enabled the researcher to create a fair report with little biases or

inaccuracies. A questionnaire was used to gather the main data. To prevent respondents'

selections from being biased, the questionnaire had open-ended and optional fields. The

secondary materials were from earlier, related investigations that were already published. In

particular, journals, books, and internet publications were used to obtain secondary information

for this project.

3.4 Methods of Data Collection

The study adopted the use of questionnaire. In gathering data, the researcher designed a well-

structured questionnaire containing 18 multiple choice questions (five Likert type scale). The

questions contained in this instrument were those derived from the objectives, research questions

and hypotheses of this study. This was to make sure that the objectives of this research are

achieved at the end of the whole study. The questionnaire was clearly simplified and structured

in a manner void of any ambiguity and technical details. Thus, most of the questions simply

required respondents to make a tick against the appropriate responses.

3.5 Population of the Study

The study populations for this study are the members of the Real Estate Developers Association

of Nigeria (REDAN) in Enugu state. There are 87 registered members of this association in

Enugu according to the online directory of the association.

3.6 Sample Size Determination and Sampling Technique

In determining the sample size, the researcher used Taro Yamane formula of sample size

determination as follows:

N
Formula; n =
1+ N (e) 2

Hence; using our Taro Yamane formula we arrived at our sample size as follows;

Where N = 87 n =? And e = 0.1 or 10%

Then our calculation goes like this;

87
=
1+ 87(0.1)2

87
=
1+ 87(0.01)

87
=
1+ 0.87

87
=
1.87

= 46.5240

Therefore, we used in our study 47 respondents as our sample size.

3.7 Validity and Reliability of Data Collection Instruments

Face and content validity were adopted. This was carried out by showing a copy of the original

draft of the questionnaire to the supervisor who is deemed to be an expert in the area of research.

He went through the questionnaire and validated the measures and the content of the instrument
to be relevant in measuring what the researcher intended to measure in this research. The

research made use of test-re-test reliability testing method.

3.8 Data Analysis Technique

The Statistical Package for Social Sciences, version IBM SPSS Statistics 23.0, was utilized by

the researcher to analyze, condense, and interpret quantitative data for this study. The

information gathered during the fieldwork was tabulated and subjected to simple regression

analysis.

REFERENCES

De Vaus, D., & de Vaus, D. (2013). Surveys in Social Research (6th ed.). Routledge.

https://doi.org/10.4324/9780203519196

Wimmer, R.D., & Dominick, J.R. (2011). Mass Media research: An introduction. Boston, MA

Wadsworth, Cengage learning.

Yamane, Taro. (1967). Statistics: An Introductory Analysis, 2nd Ed., New York: Harper and

Row.

Onwumere, J.U.J. (2019), Research methods in Business Administrative and Law. Nigeria.

Enugu State: University Press.