REINSURANCE TREATY OPTIMIZATION TECHNIQUES AND PERFORMANCE OF INSURANCE FIRMS IN KENYA
Abstract
Purpose of the Study: To evaluate the effect of reinsurance treaty optimization techniques on performance of insurance firms in Kenya.
Problem Statement: Despite the critical role of reinsurance in enhancing operational efficiency and resilience, limited research has been conducted on the specific effects of treaty optimization within Kenyan insurance firms. This gap is exacerbated by various challenges, including low interest rates, trade credit issues, and bankruptcy claims, which pose significant threats to financial stability. While existing literature explores available treaty optimization techniques, it fails to adequately address their implications for firm performance.
Methodology: Employing a descriptive-correlational research design, this study used stratified random sampling to arrive at a sample of 42 employees across ten major Kenyan insurers, and structured questionnaires were used to collect data. Analysis was conducted using SPSS software, employing descriptive statistics, ANOVA, and regression analysis to examine the relationship between treaty optimization and firm performance.
Result:
Results indicate a general readiness among organizations for treaty optimization activities, with a total score of 68% indicating agree, 19% neutral, and only 13% disagree. Treaty optimization significantly enhances various aspects of insurance firm performance, including overall performance (67.6% agree, profitability (46% agree) growth rate (58% agree). Organizational factors such as management structure (48% agree) and organizational policies (53% agree) further support successful treaty optimization efforts. The ANOVA and Regression analysis further illuminate a moderate positive correlation with (Multiple R=0.752).
Conclusion: In conclusion, this study establishes that optimized reinsurance treaties contribute to improved performance among insurance firms operating within Kenya. These findings underscore the importance of strategic treaty optimization in bolstering the resilience and effectiveness of insurance operations in the Kenyan market.
Keywords: Insurance, reinsurance treaty, risk management, firm performance, reinsurance
treaty optimization.
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