EFFICIENCY ANALYSIS OF THE INSURANCE SECTOR IN BOSNIA AND HERZEGOVINA

Mirza Sikalo () and Almira Arnaut-Berilo ()
Additional contact information
Mirza Sikalo: School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina
Almira Arnaut-Berilo: School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina

Economic Review: Journal of Economics and Business, 2021, vol. 19, issue 1, 49-62

Abstract: We analyzed the efficiency of the insurance industry in Bosnia and Herzegovina (BiH) in the period from 2015 to 2019 in order to identify good and bad practices, sources of inefficiency and to propose guidelines for the necessary efficiency improvements based on the results. Efficiency measurement was performed using the nonparametric Data Envelopment Analysis (DEA) technique as the most commonly used tool for efficiency analysis in finance. We used one output and two input variables according to the input-oriented approach assuming a variable return to scale (VRS). Empirical research was conducted on all insurance companies from BiH, which are grouped according to the size of assets, type of insurance, and headquarters in order to determine whether there are differences in the efficiency of insurance companies in terms of their size, type of insurance, or depending on whether it operates in the Federation of Bosnia and Herzegovina (FBiH) or Republic of Srpska (RS). The results of the analysis indicate significant inefficiencies in the insurance sector in BiH, but also differences among the observed groups. The insurance sector is more efficient in FBiH compared to RS, and insurance companies in the composite insurance market are significantly more efficient than companies in the non-life insurance market. Finally, the research has showed a relatively high level of positive correlation between the size of an insurance company and its efficiency. According to all efficiency indicators, there is significant potential for efficiency improvement. Based on the analysis, the main causes of inefficiency were identified and guidelines for improving efficiency were proposed.

Keywords: data envelopment analysis; technical efficiency; insurance sector efficiency; the insurance industry in Bosnia and Herzegovina (search for similar items in EconPapers)
JEL-codes: C52 G22 L25 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://ef.untz.ba/wp-content/uploads/2021/10/5_MAY_2021_DOI_pp_49_62.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tuz:journl:v:19:y:2021:i:1:p:49-62

Access Statistics for this article

Economic Review: Journal of Economics and Business is currently edited by Zijad Dzafic

More articles in Economic Review: Journal of Economics and Business from University of Tuzla, Faculty of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Senad Celikovic ().