Efficiency Analysis of Traditional and Takaful Insurance Firms in Egypt: A Two-Stage Efficiency Model

Maher Abdellatif and Yuantao Xie
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Maher Abdellatif: School of Insurance and Economics, University of International Business and Economics (UIBE), Beijing 100029, China.
Yuantao Xie: School of Insurance and Economics, University of International Business and Economics (UIBE), Beijing 100029, China.

International Journal of Science and Business, 2024, vol. 41, issue 1, 200-217

Abstract: The purpose of this study is to measure and analyze the efficiency of insurers (traditional, takaful) in Egypt, and to examine the determinants (Insurer-specific factors) that appear to affect the efficiency of insurers. The study uses a two-stage efficiency model: (1) input-oriented Data Envelopment Analysis (DEA), a non-parametric model to measure the efficiency of 17 non-life insurers (12 traditional, 5 takaful) in Egypt during the period from 2012 to 2021, and (2) a panel regression model to examine the determinants (Insurer-specific factors) of efficiency in the traditional and takaful insurance industry in Egypt. This study found that on average, the technical efficiency (TE) level of non-life insurers (traditional and takaful) was 79%, and there is still a need for 21% efficiency to improve the efficiency in the industry, moreover, takaful insurers achieved a better efficiency level than traditional insurers. On the other hand, the findings also showed that return on equity, size, type of operations, and age are positively related to insurers' efficiency, while reinsurance, claims (risks), market share, leverage, and investments are negatively related to insurers' efficiency. This study provides indicators relevant to insurance management (traditional and takaful) that will help them better utilize their resource base and increase their operational efficiency; to our knowledge, this paper is the first empirical evidence for traditional and takaful insurers together to measure efficiency and examine its determinants in Egypt.

Keywords: Efficiency; DEA; Panel regression model; Takaful; Insurance; Egypt (search for similar items in EconPapers)
Date: 2024
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