EFFICIENCY OF INSURANCE COMPANIES IN CROATIA

Abstract

Insurance companies have an important role in the stability and growth of the financial market and the economy as a whole. Therefore, it is crucial that insurance companies operate efficiently. Due to financial consolidation that overtook the Croatian financial market, the number of insurance companies dicreased from 24 in 2015, at the start of the observed period, to 15 in 2020. Following the financial consolidation, a number of large insurance companies that dominate the Croatian insurance market was set up. The main goal of this paper is to estimate and compare the efficiency of Croatian insurance companies using traditional financial indicators and nonparametric DEA methodology in the period from 2015 until 2020. Furthermore, the paper aims to determine whether large insurers are more efficient than the medium and small insurers. The results indicate that large insurers in general achieve above-average the ROI, ROE, and ROA values and below-average the claims, expense, and debt ratios. They achieve above-average or full efficiency according to the DEA methodology. In addition, some small insurance companies tend to be efficient, while for medium insurance companies the results are more complicated. Finally, the average efficiency of insurance companies improved in the observed period, while the gap between large, medium and small insurers keeps widening.