Market Status as a Determinant of the Performance of Kenyan Insurance Firms During Hard and Soft Market Cycles

This study examined market status as a determinant of the performance of Kenyan insurance firms during hard and soft market cycles by analyzing insurance sector data covering the period 2015–2025. The objective was to assess the nature of insurance market cycles in Kenya, evaluate the financial and operational characteristics associated with these cycles, and determine their implications for firm performance. The study employed descriptive statistical analysis using market cycle indicators, financial measures, operational variables, and performance metrics obtained from insurance firms operating in Kenya. The findings revealed that the Kenyan insurance industry experienced recurring transitions between soft, transitional, and hard market cycles, with a mean market cycle score of 1.90 and a standard deviation of 0.831, indicating moderate but persistent cyclical fluctuations. The period 2015–2017 was characterized by a soft market marked by intense competition, declining premium rates, expanding underwriting capacity, and compressed profitability. A market correction emerged during 2018–2019, driven by rising claims, worsening loss ratios, and declining underwriting margins. The industry then entered a pronounced hard market phase during 2020–2022, characterized by premium rate increases, stricter underwriting standards, reduced capacity, and heightened profitability pressures exacerbated by the COVID-19 pandemic and increasing claims costs. Between 2023 and 2025, the market gradually stabilized and returned to softer conditions as capital positions improved and profitability recovered. The results showed that market status significantly influenced insurance firm’s performance. Profitability indicators exhibited substantial variability, with profit margins recording a standard deviation of 13.687, ROA averaging 6.3%, and ROE averaging 24.8%. Hard market conditions were associated with increased underwriting discipline and premium growth but were accompanied by elevated claims costs and operational pressures that constrained profitability in some segments. Conversely, soft market conditions promoted premium expansion and market share growth but often resulted in margin erosion due to aggressive pricing competition. Financial factors such as capital adequacy, claims experience, investment income, and operational efficiency displayed considerable variation across firms and were important determinants of performance throughout the underwriting cycle. The study concludes that market status is a critical determinant of the performance of Kenyan insurance firms, influencing profitability, underwriting outcomes, and financial stability across different phases of the insurance cycle. While technological advancements, enhanced risk management practices, and regulatory oversight have moderated market volatility, cyclical patterns remain an inherent feature of the Kenyan insurance industry. The findings underscore the need for insurers to adopt adaptive pricing, capital management, and underwriting strategies to sustain performance under both hard and soft market conditions.