The Effects Of Risk Management Variables On The Efficiency Of Insurance Firms In Vietnam

Abstract

This investigation explores the correlation between risk management variables and the effeciency of insurance companies in Vietnam from 2020 to 2023. The dataset comprises information obtained from 24 insurance companies, encompassing both local and international entities operating within Vietnam. This study utilizes non-parametric Data Envelopment Analysis (DEA) and truncated regression techniques to identify the risk elements influencing the efficiency of insurance companies in Vietnam within the framework of constant return to scale (CRS) and variable return to scale (VRS) models. The empirical results show that: (1) Under the CRS model, operational risk management and liquidity risk management have a positive interaction with efficiency, while market risk management shows a reverse relationship to efficiency. Meanwhile, the credit risk has no impact on efficiency. (2) Under the VRS model, operational risk management and liquidity risk management have a positive interaction with efficiency, whereas credit risk has a negative impact on efficiency. However, market risk management has no influence on the efficiency of firms. Therefore, it is recommended that the insurers and the authorities should make sound decisions in controlling and allocating company resources to control company performance and have a precise view of the company's position compared to rivals, thereby improving the quality of insurance services.