Purpose: The main focus of the study was to establish effect of innovation strategies on competitive advantage of insurance firms in Kenya. The study was anchored on McKinsey 7S Framework, Transaction Cost Innovation Theory, Porter’s 5 Forces Model and Dynamic Capabilities theory, and it sought to establish the effect of product innovation strategy, process innovation strategy and marketing innovation strategy on competitive advantage of insurance firms in Kenya. In addition, the moderating effect of regulatory environment on the relationship between innovation strategy and competitive advantage of insurance firms in Kenya was tested given the importance of the regulator. Methodology: The study used a cross sectional survey design where all the 55 insurance firms operating in Kenya and were targeted. Through purposive sampling, the study targeted employees in management positions, either from administration, sales and marketing, strategic division or Finance department. Both primary and secondary data was used to achieve the study objectives where they were used to establish trends, descriptive and inferential statistics. Specifically, correlation and regression analysis were conducted to test empirically the relationship between the study variables. The study results were presented in form of Tables and Figures. Findings: The findings revealed that product innovation strategy had a significant and positive influence on the competitive advantage of insurance industry in Kenya. Process innovation was also found to positively and significantly contribute to the competitive advantage of insurance industry in Kenya. The findings further revealed that marketing innovation was essential in enhancing the competitive advantage of insurance industry in Kenya. Regulatory framework was found to significantly moderate the relationship between innovation strategies and competitive advantage of insurance industry in Kenya. The study concluded that innovation strategies (product innovation, process innovation and marketing innovation) are essential in determining the competitive advantage of insurance industry in Kenya. Unique Contributions to theory, practice and policy: It is therefore recommended that the management of the insurance companies ought to uphold innovation strategy through marketing innovation, product innovation and process innovation so as to stimulate the competitive advantage of their respective insurance companies. The regulatory body, IRA, ought to set a clear framework on policies and regulations that govern insurance innovations so as to set a level ground for the companies to embrace innovation and enhance their competitive advantage.