Effect Of Operational Risk On Financial Performance Of General Insurance Firms In Nairobi, Kenya

Abstract

The study sought to determine effect of OR on FP of general insurance firms in Nairobi, Kenya. Descriptive survey design was adopted targeting 40 general insurance firms in Nairobi and census was used. Secondary data was gathered on a period 2017-2021 from Insurance Regulatory Authority and the financial statements of respective insurance firms. The analysis of the collected data was done through means and standard deviations, correlation and regression analysis and presented through tables. It emerged that operational risk (β=0.201, p<0.05), liquidity (β=0.103, p<0.05) and firm size (β=0.202, p<0.05) were significant predictors of financial performance of insurance firms in Kenya. The study concludes that operational risk, liquidity and firm size significantly predict financial performance. The study recommends that risk and operation managers working in general insurance firms in Kenya should have in place sound strategies of mitigating exposure to operational risks so as to enhance financial performance. The finance managers working among general insurance firms should establish a balance between current assets and current liabilities. The policy makers working in the general insurance firms in Kenya need to formulate should policies as far as operational risk is concerned.