Effect Of Reinsurance Practices On Profitability Of General Insurance Companies In Kenya

Abstract

General insurance companies in Kenya are linked with several reinsurance practices, including reinsurance capacity, underwriting capacity, risk management, and re-insurance pools. The assessment focused on effect of reinsurance practices on profitability of general insurance companies. Descriptive cross sectional research design was adopted. All the 29 general insurance companies in Kenya were targeted. Primary data were gathered from the insurance companies using questionnaires. The 29 reinsurance managers and underwriting managers of these firms were the target respondents. Twenty-two (22) questionnaires (75.9%) were successfully completed and returned. Data were analysed using descriptive analysis. The findings showed that reinsurance practices, involving reinsurance capacity, underwriting capacity, risk management, and reinsurance pools have significant effect on profitability of general insurers. Based on the study findings, the implication is that general insurers should engage in reinsurance practices which are closely related to the firms’ business underwriting approaches for better profitability results. The assessment recommends that for general insurers to improve their overall profitability, they should participate in reinsurance practices as a priority, bearing in mind their status in previous loss experience, loss frequency, as well as risk size. It is imperative for general insurers to have optimal risk management measures. It further recommends that general insurers should incorporate more branches across the country. In order to increase penetration which is still low in Kenya hence capturing a wider market, especially by reaching out to the many potential customers staying away from major town centres who may demand general insurance products to tap more revenue and increase profitability.