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THE EVALUATION OF EFFICIENCY AFTER SOLVENCY 2 IMPLEMENTATION: AN EMPIRICAL STUDY IN THE REPUBLIC OF CROATIA

The insurance industry significantly affects each country's economy and is an essential factor in the financial system's stability. The procedures of insurance companies are under significant state control and supervision. This supervision's primary goal is to protect the interests of both the policyholders and the insurers. Since insurance companies are a vital part of each country's financial system, the share of their assets in all financial institutions assets is an indicator of market development. That is why the insurance industry and determining the efficiency in this sector are becoming topics that an increasing number of authors are dealing with. This paper seeks to assess the efficiency of non-life and composite insurance companies in the Republic of Croatia in the context of the introduction and implementation of the Solvency II Directive. Consequently, the paper's main goal is to determine the efficiency and observe did the introduction of the new legal and regulatory framework Solvency II affect the change in the efficiency of the observed decision-makers, that is, non-life and composite insurance companies. To determine the efficiency, the method of data envelopment analysis was used as a method for assessing the performance of insurance companies. The conducted research by the model focused on outputs, pointed out that, out of a total of fourteen non-life and composite insurance companies, four of them achieved the efficiency score one after implementing the Solvency II Directive in 2016. Eight companies gradually improved their efficiency scores, and only two companies had a decline in efficiency after 2016. In general, it can be concluded that the introduction and implementation of the Solvency II Directive influenced the efficiency of the observed insurance companies.

non-life insurance ; Data Envelopment Analysis ; Solvency 2 ; the Republic of Croatia

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