Determining the leaders of Ukraine’s insurance market based on the adaptation of the DEA method

Abstract

The escalating wartime risks in Ukraine has led to a rapid reduction in insurance coverage in life and non-life segments. The purpose of the study is to rank Ukraine’s insurance companies based on an adaptation of the DEA method to the insurance market conditions. The study utilized the Supervisory Statistics of the National Bank of Ukraine as data. The study also used ranking of insurance companies based on technical efficiency criteria. The output indicators include the profitability of total capital (Output1) and the occupied share of the insurance market (Output2). The input indicators comprise the volume of total assets of insurers (Input1), the share of equity capital in assets (Input2), the level of gross payments (Input3), and the level of payments to insurance reserves (Input4). The ranking of insurance companies is based on minimizing the distance of each from the bounds of technical efficiency by solving a set of optimization problems. Based on the modeling results, a list of market leaders (7 companies) was formed for the end of the third quarter of 2023. They served nearly 37% of the insurance market in Ukraine, accumulating 41.5% of the total assets of this financial market sector. So, the primary issue for insurance companies is the loss of solvency due to the absence of adequate levels of insurance reserves. Therefore, priority measures should include strengthening regulatory constraints in this financial market segment to facilitate its qualitative renewal.