What drives efficiency of insurance companies in Western Balkan countries?

Abstract This study investigates the technical efficiency of insurance companies in five Western Balkan countries between 2015 and 2022, using a two-stage double bootstrap data envelopment analysis (DEA). In the first stage, bias-corrected DEA efficiency scores are calculated. The second stage employs the bootstrapped truncated regression to investigate relationships between firm characteristics and these efficiencies. Our findings indicate that insurance companies in Serbia exhibit the highest level of technical efficiency, while their counterparts in Albania display the lowest level. Five key drivers of insurer efficiency are identified: firm size, specialisation, growth, solvency, and profitability, while the effect of ownership structure is not statistically significant. Further analysis of returns to scale indicates that most large and medium-sized insurers in Western Balkan countries operate under decreasing returns to scale (DRS). In contrast, most small insurers exhibit increasing returns to scale (IRS). This research contributes to a better understanding of factors influencing the efficiency of insurance companies in developing countries, with implications for insurance regulators, strategic management within the industry, and future research endeavours.