Effect of Fair Value Measurement Model on Financial Performance of Insurance Firms

Abstract

The purpose of the study was to analyse the effect of the fair value measurement model on the financial performance of insurance firms. A descriptive research design was employed, targeting insurance companies listed on the Nairobi Securities Exchange (NSE). Primary data was collected, organised, coded, and analysed using Microsoft Excel and SPSS. Regression analysis was applied to test the relationships between variables, where the models under research showed a positive correlation with the Financial Performance. The fair value measurement model posits a statistically positive correlation of r=0.270 and a confidence level of 95% where the value of 0.000951 is reported. These results signify that the models offer a more realistic financial position of the firm. This model enhances investors' confidence level, transparency, and improved decisions that ultimately improve the financial performance, hence gaining a competitive advantage. Based on such grounds, the null hypothesis (H1) is rejected, affirming that FVM is elemental in driving financial performance. Fair Value Measurement (FVM) model demonstrated positive correlation and predictive power, suggesting that insurance firms that actively align asset valuation with current market realities and observable input hierarchies report stronger financial outcomes. This is especially relevant in the context of Kenya’s transition to IFRS 13 and IFRS 17, which emphasize transparency, investor confidence, and compliance. Adopt and Institutionalize Fair Value Measurement (FVM) as a primary valuation standard, as it gives strong correlation with ROA; this model enhances transparency and alignment with IFRS 13. Companies should train valuation and finance teams on the application of the different hierarchies and invest in valuation software that ensures timely market-based revaluation.