Competit ion in the economy can create a positive prospect for economic growth and developmentrnof a country. Competition in Ethi opian financial sector in general and insurance industry inrnpalticular should be strong enough for enhancement of efficiency, provision of better service torncustomers, greater innovation and lower prices thus resulting in improvement of consumersrnwelfa re and overall economic growth of the country. Since the introduction of modern financialrnsector in Ethiopia in 1905, the market structure of insurance industry in Ethiopia is characterizedrnby competition and monopoly depending on the financial policies issued by the rulingrngovernments of the country.rnThis paper studies the existence of market power in the Ethiopian insurance industry during 2001-rn2010, using non-structural measures of market power such as market share and Lerner index. Andrnhence insurance market concentration is measured by using Herfindahl-Hirschman Index (HHI)rnand four largest insurers' concentration ratio (CR). These measures suggest the existence ofrnmarket power in insurance industry of Ethiopia and the sector was dominated by the single staternowned Ethiopian Insurance Corporation (EIC). The major source of dominance tends towardsrngovernment regulation that is prohibition of foreign investors in financial sector of the country inrngeneral and insurance sector in particular. The study also reveals that Ethiopian insurance marketrnis highly concentrated and the top four insurers holds above 70% of the market share in terms ofrngross premium, total asset and capital.rnKey words: market power, market concentration, market dominance, entry barrier.