BBSA Research Projects (2018)

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Now showing 1 - 5 of 23
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    The Effect of political risk on exchange rate volatility: the case of Kenya
    (Strathmore University, 2018) Ogolla, Faith Akinyi
    The Kenyan economy, like many other economies in the world, is sensitive to the political events that occur. In modem day, economies with stable political environments and efficient economic policies have strong and healthy economies and are a big draw for investors. Stable exchange rates are an indicator of good economic performance. This paper examines the effect of political risk in Kenya on the volatility of exchange rates. It uses daily time series data of the Euro and USD exchange rates that covers a period from June 2007 to August 2013. The period covers three major political events; the 2007 general election, the 2010 constitutional referendum and the 2013 general election. This study uses a TGARCH(1,1) with a dummy variable for political risk. Results from the data analysis show that political risk has significant effects on the volatilities of the Euro and USD exchange rates. Recommendations on additional studies are made. First, a possible study can be done to investigate the effect of political risk on additional exchange rates e.g. the Japanese yen (JPY), the British pound (GBP), etc. Similarly, further research could be done to establish the effect of both positive and negative political shocks on Kenyan economy
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    Effects of fraud management practices on the profitability in the insurance industry
    (Strathmore University, 2018) Ndolo, Lucy Nzivulu
    The purpose of this research was to study the effect of fraud management practices on the profitability of insurance companies in Kenya. The category of fraud focused on was the policyholder and claims fraud which is defined as the fraud against the insurer in the purchase and/or execution of an insurance product by obtaining wrongful coverage or payment. The deductive arguments adopted were; the reasons for fraud risk management in insurance companies in Kenya based on the International Association of insurance Supervisors, the fraud management practices carried out by insurance firms in Kenya more specifically aligned with the claims management guidelines stipulated by the IRA under section 8 of the guidelines and finally the relationship between the fraud management practices and profitability of insurance firms in Kenya. Primary data was collected using a structured questionnaire. Secondary data was collected from the industry statistics provided by AKI for the past three years. The financial data extracted was the net profit and the total assets to obtain the ROA, to indicate profitability. The companies chosen were the top fifteen general insurance companies. The findings of the study showed that fraud risk management policies in insurance companies in Kenya are driven by the need to meet ethical standards as well as the need to enforce regulatory/supervisory standards. Moreover, the most common fraud management practice was fraud response in which investigations were the most preferred technique. Finally, the results of the regression analysis revealed a low correlation between fraud management practices and profitability
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    Analyzing the significance of the impact of political unrest and terrorism on Kenya's tourism industry: an event study approach
    (Strathmore University, 2018) Ndunyu, John Gakuya
    Tourism is one of the key drivers of Kenya's socio-economic development. The total contribution of the tourism industry to Kenya's Gross Domestic Product was 9.8% in the year 2016 while the total employment contributed by the tourism industry in Kenya was 9.2% of total employment in Kenya. The tourism sector is therefore a sensitive area that could cause significant socioeconomic disasters in an economy if negatively affected. Because tourists are sensitive to the negative image of a tourist destination, events of violence can affect a tourist destination long after the event has passed and stability has, in effect, been restored. Perceptions of political instability and safety are a prerequisite for tourist visitation. Violent protests, social unrest, civil war, terrorist actions, the perceived violations of rights, or even the mere threat of these activities can all serve to cause tourists to alter travel behavior. Over the past 20 years, Kenya has experienced notable and painful ordeals of terrorism and political unrest. Some of the events that claimed a great number of casualties are the United States Embassy bombings of 1998, the 2007-2008 postelections violence, the 2013 Westgate tenor attack and the Garissa University massacre
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    Operational risk modeling for general insurance companies in Kenya
    (Strathmore University, 2018) Mwangi, Michael Maina
    This study looked at the quantification of operational risk based capital for general insurance companies in Kenya. It is important to note that the regulator requires all insurance companies to compute risk based capital annually. The study pointed out the various operational risk categories and analyzed the operational risk modeling approaches that have been developed in the insurance sector globally. In Kenya, the model used by the regulator to quantify operational risk capital is that recommended by the actuarial profession in the United Kingdom (Solvency II). The main shortcomings of the model used by the regulator were cited as lack of prudence in the estimation of capital requirements and the failure to truly indicate how insurance company operations interact leading to operational losses. The study then illustrated how a proxy-a hybrid modeling approach, could be used to quantify operational risk. The hybrid model was shown to be more prudent than the standardized approach used by the regulator. The methodology involved modeling a general insurance company and creating a hybrid simulations model for operational risk losses. Further, operational risk capital estimates were computed using the model by the regulator and the hybrid simulations model. The operational risk capital estimates were compared and tested for adequacy. The results led to the conclusion that the hybrid model yielded a more prudent operational risk capital estimate than the model used by the regulator. Based on the overall conclusion that the standardized method may not be fully adequate in computing operational risk capital, it is hoped that this study will encourage best practice in computing operational risk capital. It is also hoped that the study increases interest in Kenya's actuarial profession in the emerging field of operational risk
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    Motor private vehicle rating model
    (Strathmore University, 2018) Pokar, Heta Vinod
    Most motor insurance companies in Kenya collect about 5-l 0 rating factors in their proposal forms. Despite having these data, these companies have in the past used the minimum rates prescribed by the Insurance Regulatory Authority (IRA). This implies that they are less likely to be aware of rating factors and their importance in pricing. This may justify one of the major reasons as to why motor insurance companies have been loss making. Although the minimum rates were specified, there was no regulation that compelled insurance companies not to price using rating factors. Thus although they collected data on the rating factors, they used the minimum rates possibly due to competitive pressure and market practice. However, IRA has recently issued a circular1 to insurance companies that abolishes the use of minimum rates from 2018 thus insurance companies will be required to price based on their own experience. Rating factors fom1 the basis for pricing. Therefore, the overall objective of this study is to assess the use of rating factors to price motor premiums in light of the new IRA regulations. The past experience and data will be used to evaluate the use of relevant rating factors to price motor insurance policies and develop a simplified pricing model to compute premiums. A motor rating factor model is a simplified model that enables you to calculate the premium to be charged on a particular motor depending on the various rating factor such as type of cover, year of manufacture, engine rating, body type, make, color, carrying capacity, value of the car, age and profession of policyholder. Each of these factors contribute to the pure risk premium. The total premium payable is the combination of pure risk premium, expense premium, commission premium, profit loadings premiums and any other optional benefits. The findings of this model show that the premium rate varies significantly from the current model that assumes a fixed minimum rate on the value of the car.