Effect of Financial Risk Management on the Performance of Insurance Companies in Rwanda (2015-2019)

Abstract

The study deals with the Effect of Financial Risk Management on the Performance of Insurance Companies in Rwanda. It investigates the effectiveness of financial risk management in the performance of insurance companies from March 2015 to March 2019. Specifically, this study identifies the ability of insurance companies to meet their financial obligations; assesses the extent to which insurance companies generate profits, and examines the relationship between financial risk management and performance of insurance companies in Rwanda. To achieve these objectives, this study followed a systematic methodology. It collected secondary data from BNR and used descriptive statistics and multiple linear regression analysis to investigate the relationship which is measured through the eligible determinants, using STATA. The results showed that Rwandan Insurance Companies adopted different financial risk management practices in their operations and that this had a strong effect on their performance. Return on equity (ROE) was found to be the most significant in influencing financial performance positively with (57.089%) variations, followed by net income after taxes with (17.503%) variations, the total expenses were found that did not (variation???). The net premium earned was found to be negatively influencing the financial performance of insurance companies in Rwanda with (15.627%) variations. This study concludes that there is a positive relationship between financial risk management and the performance of insurance companies in Rwanda explained by (96.76%). The study recommends that insurance companies in Rwanda should adopt a different approach to financial risk management to derive greater benefits from their financial management efforts, should also adopt professional skilled personnel and actuaries to perform actuarial work and valuations professionally with expertise. Furthermore, Rwandan insurance companies should follow the current international practice by adopting Enterprise risk management (ERM).