Effects of Exploration and Mining Risks on the Insurance Industry in Kenya

Abstract

ABSTARCT Africa has considerable oil and gas resources that can help accelerate growth in the continent if used strategically. Although new reserves are being discovered progressively they are not equally distributed; indeed thirty eight out of fifty four African countries are currently net oil exporters (BP statistical review of world energy June 2013). Proper utilization of these resources therefore presents an opportunity to be pursued and an obstacle to be tackled by African continents including Kenya. Kenya recently joined the league of oil producing nations with its oil reserve in Northern frontiers meeting the benchmark for commercial exploitation but with these discoveries come insurable risks. The objectives of this study therefore was to establish the effects and benefits of mining and exploration risks on the insurance industry in Kenya and the challenges associated with handling these risks. This was an exploratory study hence survey method was used to identify these effects and challenges. The Target population included the 45 licensed insurance companies in Kenya, five reinsurance companies domiciled in Kenya, two direct insurance brokers and two reinsurance brokers. Primary data for the study was collected using self administered questionnaire and data analyzed using descriptive statistics such as frequencies, mean scores and cumulative frequencies Main finding of the study is that training and capacity building is fundamental to the insurance industry exploiting the vast potential of this resource otherwise fronting arrangements and capital flight to foreign insurance and reinsurance companies is inevitable. This is the first study on this subject and further research would is recommended as the country and the insurance industry start to realize the impact of oil and gas exploration and mining