Market Structure, Efficiency, and Performance of Jordan Insurance Market

Abstract

This study aims to investigate the impact of the market share, according to the SCP hypothesis, technical efficiency, according to the ES hypothesis, and other control variables on the performance of insurance companies in Jordan. The study used panel data for 22 insurance companies operating in Jordan during 2000-2016. The authors used the Herfindahl- Hirschman Index (HHI) and the concentration ratio (CR) to evaluate the Market structure of the insurance sector, Also employed market share as a proxy of the SCP hypothesis while efficiency score estimated using the DEA technique to proxy for the ES hypothesis, control variables were (Reinsurance, leverage, and Underwriting risk), while the dependent variable, performance was measured as return on assets. The model estimated using Random Effect GLS. The study found that the insurance market in Jordan is highly concentrated, where a few insurers control a large market share of premiums. Also, the result supports the (SCP) hypothesis for the insurance market in Jordan, and Reinsurance, leverage, and Underwriting Risk have a negative relationship with ROA. This is the first study -to the best author’s knowledge - to test SCP and ES hypothesis in the insurance sector in Jordan