Insurance and Performance of Hydroelectric Energy Projects in Kenya

International Journal of Research and Scientific Innovation (IJRSI) | Volume VIII, Issue VI, June 2021 | ISSN 2321–2705

Insurance and Performance of Hydroelectric Energy Projects in Kenya

Amolo Elvis Juma Amolo, PhD¹, Charles Mallans Rambo, PhD²*, Charles Misiko Wafula, PhD³*
¹University of Nairobi, Kenya
²Associate Professor PhD, University of Nairobi, School of Open and Distance Learning, Kenya
³Senior Lecturer PhD, University of Nairobi, School of Open and Distance Learning, Kenya
Corresponding author*

Abstract
Renewable energy investment has been underexploited in Kenya in specific due to investor’s negative perception of the regions high investment risk which retards the degree of private capital penetration. The purpose of the study was to examine how Insurance influence performance of hydroelectric energy projects in Kenya. The study adopted pragmatism paradigm and descriptive survey design while questionnaires and interview guide were used to collect quantitative and qualitative data from a census of 94 participants. A Validity coefficient of 0.775 and reliability coefficient of 0.781 obtained after pretest among 10% of the un-included respondents. Analysis involved descriptive statistic and inferential statistic of Correlation and Regression at a significance level of 0.05. The result of the hypothesis: H0: Insurance does not significantly influence performance of hydroelectric energy projects in Kenya was rejected since P=0.000<0.05. Therefore the study concluded that there is significant influence of Insurance on performance of hydroelectric energy projects in Kenya. It is recommended that Project management and policy makers should integrate Insurance products to improve performance of hydroelectric energy projects besides developing targeted policies for strengthening adoption of Insurance products to boost investors and lenders confidence. Further research should be carried out on the influence of insurance on other renewable energy projects in Kenya

Introduction

In spite of Kenya having an estimated hydropower potential of about 6,000MW for large hydros (above 10MW) and over 3,000MW for small hydros, only 823.8 MW of large hydros and less than 25MW of small hydros has been exploited (Ministry of Energy, 2020). For this massive infrastructural investment to be realized the financial markets must play critical role in stimulating private investments into the renewable energy development to bridge the scarce resources at disposal of the public sector (Rezec and Scholtens, 2017). But due to investors negative perception of Kenya’s high investment risk and low creditworthiness, the degree of private capital penetration has generally remained low (OECD, 2013). Thus, utilization of Insurance to de-risk renewable energy infrastructure projects is essential for reducing private investment cost.
Insurance companies as the paramount financial organizations in any surviving economy, underwrites the unwanted risks by the insuring public, thus acting as a financial security tool and economic protection in situations of risks (Soye, Adeyemo and Ayo, 2017). Insurance companies charge premiums for accepting various risk types with the expectation of generating adequate return on capital even after indemnifying the insured upon claim in case of any loss eventuality. Insurance is defined as a mechanism of transferring risk where by individuals or corporate organization shift some life uncertainties to other business enterprises’ shoulders and in return pay premiums for the risk transfer (Soye, Adeyemo and Ayo, 2017). Although insurance companies underwrite the risks of the insured companies, mitigating their own risk is a real challenge that requires reinsurance.

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