Under pressure: how the business environment affects productivity and efficiency of European life insurance companies

Deregulation and widespread economic changes have fundamentally affected the business environment of European life insurance companies over the last decades. We apply multi-stage data envelopment analysis to identify the impact of the changing environment on productivity and efficiency of European life insurance companies. Considering a sample of 960 life insurance companies from 14 European countries, we show that general economic, capital market, and insurance market conditions are important drivers of efficiency. Furthermore, we demonstrate that the impact of some firm-specific characteristics on efficiency is influenced by the business conditions. Our results reveal no technical change in the life insurance sector, but an efficiency increase in the 2002–2013 period that leads to an increase in the total factor productivity; these trends can be explained by more challenging business conditions in the 2000s.