ENVIRONMENTAL MUNIFICENCE AND PERFORMANCE OF INSURANCE COMPANIES IN KENYA

Author: John Mutugi Gachoki

ABSTRACT

In the last 5 years, the Kenyan economy has been experiencing turbulence and the market has been unstable for business. Some businesses have reported losses, others gone under while majority are barely surviving on government aid. This is partly attributed to the prolonged drought, insufficient rainfall, Covid 19 pandemic, Russia-Ukraine war and the long 2022 campaign period for 2022 general elections. The insurance industry has been hard hit considering majority of Kenyans consider insurance as secondary service. This implies that any reduction in their disposable income reduces their chances of acquiring an insurance cover. This study therefore sought to find out the effect of environmental munificence on performance of insurance companies in Kenya. The indicators for environmental munificence were market share, market orientation and sales growth. Performance of insurance companies was measured through analyzing the return on equity.  All the 55 registered and licensed insurance companies in Kenya were considered for this study. A regression model was used to test the relationship among the interacting variables. Environmental munificence was found to have a negative significant effect on equity. During the period under review, market share and sales indicated a negative effect on return on equity while market orientation had insignificant statistical results. This study concluded that improvement in environmental munificence results to increase in return on asset while a decline in environmental munificence results into negative results.   This study recommends that insurance companies should first study the environment to determine whether its munificence or not before introducing products or services to the economy. The findings of this study will be helpful to students and scholars, business’s particularly insurance companies and the government.

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