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Underwriting Apophenia and Cryptids: Are Cycles Statistical Figments of our Imagination?

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  • M Martin Boyer

    (Département de la Finance, HEC Montréal (Université de Montréal). 3000, chemin de la Côte-Sainte-Catherine, Montréal, QC, Canada H3T 2A7)

  • Iqbal Owadally

    (Cass Business School, City University London, 106 Bunhill Row, London EC1Y 8TZ, U.K.)

Abstract

This paper re-examines the evidence in favour of the existence of underwriting cycles in property and casualty insurance and their economical significance. Using a meta-analysis of published papers in the area of insurance economics, we show that the evidence supporting the existence of underwriting cycles is misleading. There is, in fact, little evidence in favour of insurance cycles with a linear autoregressive character. This means that any cyclicality in firm profitability in the property and casualty insurance industry is not predictable in a classical econometric framework. It follows that pricing in the property and casualty insurance industry is not incompatible with that of a competitive market.

Suggested Citation

  • M Martin Boyer & Iqbal Owadally, 2015. "Underwriting Apophenia and Cryptids: Are Cycles Statistical Figments of our Imagination?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(2), pages 232-255, April.
    • Handle: RePEc:pal:gpprii:v:40:y:2015:i:2:p:232-255
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    Cited by:

    1. Annette Hofmann & Cristina Sattarhoff, 2023. "Underwriting Cycles in Property-Casualty Insurance: The Impact of Catastrophic Events," Risks, MDPI, vol. 11(4), pages 1-25, April.
    2. Iqbal Owadally & Feng Zhou & Douglas Wright, 2018. "The Insurance Industry as a Complex Social System: Competition, Cycles and Crises," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 21(4), pages 1-2.

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