Effects of Risk Management Practices on the Performance of Insurance Firms in Kenya: A Case of AIG Insurance Company Ltd

The study investigates the impact of risk management on performance of insurance companies. The research was done in Nairobi, in particular AIG insurance company where most of the respondent’s work. AIG have made investments in personnel, processes and technology to help control business risk. Historically, these risk investments have focused primarily on financial controls and regulatory compliance. The objectives of this study were aimed at knowing the impact of risk management on performance of insurance companies. Random sampling was used to select fifty one respondents. The research instruments majorly used included a set of questionnaires; for the respondents. The data collected has been presented using descriptive techniques and especially frequency distribution tables, pie charts and bar graphs. The findings of the study reveal that on operational risk management the underlying causes of operational risk losses are not always initially observable. It can be difficult to uncover the exact chain of events that led to the occurrence of the loss. In addition, one cause might be linked to more than one event or one event may have multiple causes (eg cascading control failures), resulting in different types of losses that could be covered by different insurance policies. On governance risk management through training and related activities aimed at building aimed at building awareness of the importance of ERM, roles and responsibilities and value to be derived from ERM. These results point to appropriate focus on risk governance since relevant, on time information risk and responsibilities. Reduced enterprise IT support / budgets and increased ease of technology deployments has led to multiple “shadow IT” organizations within enterprises. Shadow groups tend to not follow established control procedures. On strategic risk management, boards are seeing rapid increases both in the speed with which risk events take place and the contagion with which they spread across different categories of risk. They are especially concerned about the escalating impact of ‘catastrophic’ risks, which can threaten an organisation’s very existence and even undermine entire industries.