Efficiency and Financial Health in the European Insurance Market

Efficiency and Financial Health in the European Insurance Market Eva Suárez-Álvarez , Raquel Quiroga-García , Isabel Manzano-Pérez, Nuria López-Mielgo Abstract This paper analyses the relationship between the financial health of insurers and their efficiency through a two-stage methodology. In a first stage, efficiency is calculated using a nonparametric data envelopment analysis approach. In a second stage, a Tobit model, with panel data, is used to study how financial health – measured by financial ratios – is related to the efficiency scores. 424 insurers, both life and non-life, from 14 different European countries during the period 2007-2011 are analysed. The results confirm that insurers with the best financial health also happen to be the most efficient. Full Text: PDF DOI: 10.15640/jibe.v4n2a4