South Asian Journal of Social Studies and Economics

The scientific knowledge of the determinants of insurers’ distress has further been reinvigorated by the 2017/2019 global economic and financial crises. However, there are also a number of market risks facing the industry resulting into financial performance, if left unchecked can lead to insurance failure. Thus to enhance industry stability, it is important for firms to take mitigation. The purpose of this research was to examine the financial risks on financial performance of the insurance companies in Kenya. The overall financial risk of the insurance companies is the independent variable and was determined using the Consumer price Index, Standard deviation on foreign exchange on USD and Interest Coverage Ratio. Quantitative models were adopted because the study used secondary data which was collected from financial statements as per the audits from the selected institution. The study targeted six listed insurance in Kenya which is sufficient for generalizing. The recorded data was then analyzed using SPSS version 20.0. Regression analysis was used to find the effect of financial risk on financial performance. The period under study was from 2014 to 2024. The study found out that all the independent variables operation risk, credit risk, market risk and legal risk are positively related to financial performance of insurance companies in listed in Nairobi security exchange meaning high risks contribute to low performance of most insurance companies in Nairobi security exchange. The study recommended appropriate mitigation of risks for the betterment of insurance of companies in Kenya.