Foreign Ownership and Non‐Life Insurer Efficiency in the Japanese Marketplace

Abstract

Traditional shareholding patterns in Japan have experienced significant change beginning in the early 1990s. Since that time, foreign institutional shareholding has increased significantly largely at the expense of domestic financial institution ownership. This article examines whether these changes in ownership patterns share a relationship with insurer performance in the non‐life insurance market. Using data from 1992 to 2005, we assess performance in terms of efficiency measures using data envelopment analyses (DEA) techniques. Our results show that higher levels of domestic financial institution ownership in Japan are associated with insurer inefficiency. Relative to that relationship, the foreign ownership–insurer efficiency relationship is found to be positive. Additionally, we find that the disparity between those relationships has become more acute since 2001 when the Japanese non‐life insurance market experienced significant consolidation.

Measuring Technical Efficiency of Insurance Companies Using Dynamic Network Dea: An Intermediation Approach

“…Efficiency-related studies using the DEA technique among insurance companies can be traced back to the early 1990s (Bjurek et al 1990;Mahajan 1991;Fecher, Pestieau 1993;Cummins et al 1996, Cummins, Zi 1998, Cummins et al 1999. There are also recent attempts to measure the efficiency of insurance companies (for example, Huang et al 2012;Huang, Eling 2013;Kweh et al 2014aKweh et al , 2014bKuo et al 2017;, but insurance-related studies remain limited relative to research on other financial institutions. The study by Liu et al (2013) on DEA application in research published between 1978 and 2010 show that only 44 (1.4 percent) papers focused on insurance companies, whereas 323 (10.3 percent) papers were related to the banking sector.…”

“…Table 4 The Kruskal-Wallis test further confirms that significant differences exist between the overall efficiency scores of foreign and local insurers at the 1 percent significant level (Table 7). Foreign insurers are able to better utilize resources given their technological advancement (Huang et al 2012), and quality of services (Choi, Elyasiani 2011). In this regard, policymakers should encourage learning and understanding of the best practices of the foreign insurers among the local insurers.…”

“…The current insurance literature has given more emphasis on the use of the production approach, which is more appropriate for evaluating the performance of manufacturing companies (Chen et al 2011;Cummins, Rubio-Misas 2006;Cummins et al 2010;Cummins, Xie 2008;Eling, Luhnen 2010b;Kuo et al 2017;Lu et al 2014;Nourani et al 2017), while the application of the intermediation approach has not received much attention in insurance-related studies. Additionally, although recent research has increasingly focused on the empirical evaluation of insurance efficiency, recent studies have largely adopted traditional measures of efficiency evaluation (Biener, Eling 2012;Cummins et al 2010;Huang et al 2012;Huang, Eling 2013;Xie 2010); therefore, a consistent conclusion remains elusive. The traditional DEA assumes a service process as a single black box that transforms inputs to outputs.…”

Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2012 Update

“…Using data envelopment analysis, Huang et al. () find that foreign ownership has a positive impact on insurer efficiency for the Japanese property–casualty insurance market in the time period 1992–2005. Their results also suggest an increase in the observed disparity between foreign‐owned and domestic institutions.…”

Impact of Ownership Structure and Business Diversifications on the Risk-Taking Behaviors of Insurance Companies in Vietnam

“…Institutional ownership IO The ownership of institutional investors (Callen & Fang, 2013). Foreign ownership FO The ownership of foreign investors (Huang et al, 2012). Non-core activities Non-core Non-core activities are the ratio of total on-balance sheet liabilities minus total insurance reserves to total liabilities (Chang et al, 2018).…”