The Relationship Between Underwriting Profit and Investment Income for the General Insurance Industry in Kenya

Abstract

ABSTRACT The purpose of this study was to examine the integration of underwriting profit and investment income at aggregate insurance industry level. The objective of study was to evaluate the relationship between underwriting profit and investment income. The target population was all the licensed non-life insurance companies in Kenya from year 2000 to 2011. Sampling criteria was those non-life insurers licensed for a period of more than three years during the study period. Data used for analysis was mined from the financial statements that insurance companies avail to Insurance Regulatory Authority annually. A descriptive regression model was used for data analysis and presentation using SPSS (version 17). Based on the study there was a weak positive relationship between the underwriting profit and investment income. The correlation can improve if insurance underwriting is viewed as a risk transfer process and not just a wealth generation endeavour. Prudent risk underwriting will ensure premium revenue growth with both increased underwriting profit and investment income. The insurance industry regulator should encourage portfolio modelling and plan for a mega-risks tendering platform similar to the Lloyds model