Effect Of Risk Management Strategies On Finanacial Performance Of Insurance Companies In Kenya

Abstract

Risk management should be at the core of an organization’s operations by integrating risk management practices into processes, methods and culture of the organization. This involves four major strategies which are risk identification, risk assessment, risk mitigation and risk monitoring. The objective of the study was to establish the effect of risk management strategies adopted by Kenyan insurance companies on the financial performance of these companies. The study adopted a descriptive research design. The target population was the 49 registered insurance companies in Kenya. Both primary and secondary data was used for the purposes of the study. Primary data was collected through questionnaires with 35 insurance companies giving a response. Secondary data was collected using desk search techniques from published reports and data from financial statements maintained by IRA for a period of five years from 2010 to 2014. Content analysis was used to analyse qualitative data whereas the quantitative data was analysed using SPSS. Regression analysis was also used in the study. The results were presented by use of tables and charts. The study established that a majority of insurance companies in Kenya had adopted risk management practices in their operations and that this had a strong effect on their financial performance. Risk mitigation was found to be the most significant in influencing financial performance, followed by risk assessment, risk management program implementation & identification respectively. This study conclusion is that there is a positive relationship between the adoption of risk management strategies and the financial performance of insurance companies in Kenya. The study recommends that insurance companies in Kenya should adopt a multifaceted approach to risk management in order to derive greater benefits from their risk management efforts.