Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Multi‐national underwriting cycles in property‐liability insurance Part I – some theory and empirical results

Multi‐national underwriting cycles in property‐liability insurance Part I – some theory and... Purpose – The purpose of this article is to examine the existence of underwriting cycles in property‐liability insurance for Switzerland, the USA, Japan, and West Germany over a period of 40 years (1957‐1997), i.e. it looks at the question of whether the unit price of insurance coverage (given by the inverse of the loss ratio) fluctuates cyclically over time. The article serves as basis and starting point for Part II, where some of the limitations of the model presented here are dealt with. Design/methodology/approach – Loss ratio data for the four countries are used for the recent period 1957‐1997. To test for the existence of cycles and calculate their length, the article applies autoregressive processes of second order, which were brought to a broader audience by a paper by Cummins and Outreville in 1987. The article also conducts a spectral analysis of the series. Findings – For West Germany, much longer cycles than in earlier studies were found for the basic model. In general, the cycles get longer for the longer period, 1957‐1997. The article concludes that the hypothesis of cycles of six years in length no longer holds globally. It also finds cross‐country differences for the primary markets of the four countries. Originality/value – Most empirical work on underwriting cycles has so far been carried out on US data. This study replicates a previous study for four countries on three continents and discusses the results and some limitations. It serves as the basis for Part II of this work. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Risk Finance Emerald Publishing

Multi‐national underwriting cycles in property‐liability insurance Part I – some theory and empirical results

The Journal of Risk Finance , Volume 7 (1): 19 – Jan 1, 2006

Loading next page...
 
/lp/emerald-publishing/multi-national-underwriting-cycles-in-property-liability-insurance-iqG4lnQyVg

References (37)

Publisher
Emerald Publishing
Copyright
Copyright © 2006 Emerald Group Publishing Limited. All rights reserved.
ISSN
1526-5943
DOI
10.1108/15265940610637816
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this article is to examine the existence of underwriting cycles in property‐liability insurance for Switzerland, the USA, Japan, and West Germany over a period of 40 years (1957‐1997), i.e. it looks at the question of whether the unit price of insurance coverage (given by the inverse of the loss ratio) fluctuates cyclically over time. The article serves as basis and starting point for Part II, where some of the limitations of the model presented here are dealt with. Design/methodology/approach – Loss ratio data for the four countries are used for the recent period 1957‐1997. To test for the existence of cycles and calculate their length, the article applies autoregressive processes of second order, which were brought to a broader audience by a paper by Cummins and Outreville in 1987. The article also conducts a spectral analysis of the series. Findings – For West Germany, much longer cycles than in earlier studies were found for the basic model. In general, the cycles get longer for the longer period, 1957‐1997. The article concludes that the hypothesis of cycles of six years in length no longer holds globally. It also finds cross‐country differences for the primary markets of the four countries. Originality/value – Most empirical work on underwriting cycles has so far been carried out on US data. This study replicates a previous study for four countries on three continents and discusses the results and some limitations. It serves as the basis for Part II of this work.

Journal

The Journal of Risk FinanceEmerald Publishing

Published: Jan 1, 2006

Keywords: Underwriting; Liability; Property insurance; Mathematical modelling

There are no references for this article.