From Arrears to Earnings: Examining the Impact of Credit Risk on Kenyan Insurers
| dc.contributor.author | Gitau, Kimacia | |
| dc.contributor.author | Wamugo, Lucy | |
| dc.contributor.author | Omagwa, Job | |
| dc.date.accessioned | 2026-04-07T08:26:42Z | |
| dc.date.available | 2026-04-07T08:26:42Z | |
| dc.date.issued | 2026-01 | |
| dc.description | Article | |
| dc.description.abstract | The insurance industry is one of the non-bank financial industry with important roles in the economic sector of a country and contributes critically and uniquely both in developing and developed countries. However, in Kenya, poor profitability was a primary factor in the deterioration and eventual closing down of at least 9 insurance companies over the past decade. This investigation aimed to ascertain the effect of credit risk on profitability of Insurance firms in Kenya. The theoretical framework incorporated modern portfolio theory, extreme value theory and institutional theory. The study employed positivist philosophical approach and explanatory research methodology. The research encompassed a comprehensive examination of all 55 insurance entities registered with the Insurance Regulatory Authority in Kenya through 31st December 2022. Audited financial reports accessible through the Insurance Regulatory Authority and Association of Kenya Insurers digital platforms provided secondary data spanning 2014 through 2022. The Central Bank of Kenya and Kenya National Bureau of Standards supplied supplementary information. Analytical procedures encompassed descriptive statistics, panel regression methodology and Pearson's Product-Moment Correlation technique. Credit risk was found to have a negative and statistically significant effect on ROE, and a negative but insignificant effect on ROA. This suggests that an increase in unpaid or delayed premiums erodes firm profitability, especially from a shareholder value perspective. As a result, the study recommends that Insurance firms in Kenya should enhance their credit risk evaluation processes and underwriting standards, particularly for policyholders, corporate clients, and investment portfolios, to minimize defaults and claim-related financial losses. | |
| dc.identifier.citation | Gitau, K., Wamugo, L., & Omagwa, J. (2026). From arrears to earnings: Examining the impact of credit risk on Kenyan insurers. IJARKE Business & Management Journal, 8(2). https://doi.org/10.32898/ibmj.01/8.2article08 | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/32898 | |
| dc.language.iso | en | |
| dc.publisher | IJARKE | |
| dc.title | From Arrears to Earnings: Examining the Impact of Credit Risk on Kenyan Insurers | |
| dc.type | Article |