The insurance companies are exposed to various risks which originated from both the internalrnand external environment. Hence, the effect of financial risk has been considered to be anrnimportant issue on the performance of insurance companies. Therefore this study tried tornexamine the relationship between financial risk and financial performance of insurers inrnEthiopia. In order to achieve this objective, the researcher used explanatory research design andrnquantitative research approach. Also the secondary Panel data covering eight (8) privaterninsurance companies in Ethiopia for twelve (12) consecutive years (2007â€“2018) were analyzedrnby using STATA software. The study tried to examine the relationship between independentrnvariables credit risk, liquidity risk, solvency risk, technical provision risk, reinsurance risk,rnunderwriting risk, firm size and dependent variable ROA. The regression result showed thatrncredit risk, solvency risk, and technical provisions risk have negative and significant effect at 1%rnand 5% significance level on performance of private insurance companies in Ethiopia, whereasrnLiquidity risk, reinsurance risk and firm size have positive and significant effect on ROA. Thernresearcher concluded that financial risk has significant effect on the performance of Ethiopianrninsurance companies. On the basis of the findings, the study recommended that there is greaterrnneed for Ethiopia insurers to give due attention the financial risks particularly credit risk,rnliquidity risk, solvency risk, technical provision risk, reinsurance risk and firm size morernintegrally and to increase their size by enhancing their assets base.