The aim of this paper is to measure the efficiency of insurance companies in Ethiopia using datarnenvelopment analysis (DEA), and to evaluate to determine the potential gains and strategic fitrnfrom potential insurance companies Mergers & Acquisitions. This study is crucial because thernwave of liberalization and deregulation may cause an industry shock in the insurance industryrnsooner because of the ongoing economic reform in the country. It has been employed an InputorientedrnData Envelopment Analysis with both Constant Returns to Scale (CRS) and VariablernReturns to Scale (VRS) model is adopted to analyze the potential gains. The data were takenrnfrom financial statements of 17 Local banks and 3 foreign insurance companies for the periodrnfrom 2016 to 2020. Contextual variables are used based on insurance size and Ownershiprnstructure. To address this critical issue the research was guided by the following researchrnquestion: identify the potential efficiency gains that would be formed in future Ethiopianrninsurance industry; identify the types of M&A that yield potential strategic fits in futurernEthiopian insurance industry M&A; determine insurance size contribution for the success ofrnstrategic fit; determine ownership type contribution for the success of strategic fit and determinernfinancial performance contribution for the success of strategic fit of the future M&As in thernEthiopian insurance industry. Stata 14 and Ms-Excel Solver Add in were used to organize andrnanalyze the data captured from financial statement of identified samples. Descriptive statisticsrnwere used to explain the potential gain in the insurance industry in Ethiopia. Data envelopmentrnanalysis (DEA) was also used to calculate the efficiency measures. Finally, the results havernshown that some local insurance companies would have been benefited with M&A activities inrnthe study period. Though the identified foreign insurance industries were relatively efficient, it isrnexpected further study to M&A activities. The researcher recommends local insurancerncompanies merger and acquisitions between themselves instead with the foreigners; and thatrnwould provide efficiency gain by producing the insurance premium with the minimumrnoperational and administration expenses.