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

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  • M. Martin Boyer

Abstract

The Lloyd's 2007 Survey of Underwriters states that "for the third year running, managing the cycle emerged as the most important challenge for the industry, by some margin"". The contention is of course that underwriting cycles exist in property and casualty insurance and are economically significant. Using a meta-analysis of published papers in the area of insurance economics, I show that the evidence in favor of underwriting cycles is misleading or even completely absent. There is in fact no statisical or economic support for the existence of underwriting cycles. This means that firm profitability in the property and casualty insurance industry is not cyclical; we only observe profitability going up or down with no meaningful pattern. It consequently follows that pricing in the property and casualty insurance industry is not incompatible with that of a competitive market."

Suggested Citation

  • M. Martin Boyer, 2013. "Underwriting Apophenia and Cryptids: Are Cycles Statistical Figments of our Imagination?," CIRANO Working Papers 2013s-07, CIRANO.
    • Handle: RePEc:cir:cirwor:2013s-07
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    File URL: https://cirano.qc.ca/files/publications/2013s-07.pdf
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    References listed on IDEAS

    as
    1. Julien Trufin & Hansjörg Albrecher & Michel Denuit, 2009. "Impact of Underwriting Cycles on the Solvency of an Insurance Company," North American Actuarial Journal, Taylor & Francis Journals, vol. 13(3), pages 385-403.
    2. Berger, Lawrence A & Cummins, J David & Tennyson, Sharon, 1992. "Reinsurance and the Liability Insurance Crisis," Journal of Risk and Uncertainty, Springer, vol. 5(3), pages 253-272, July.
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    More about this item

    Keywords

    Property and liability insurance; underwriting profits; insurance pricing;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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