Evidence of Capacity Constraints in Insurance MarketsAnne Gron Journal of Law & Economics, 1994, vol. 37, issue 2, pages 349-77 Abstract: This article provides empirical support for the primary predictions of capacity constraint theories of property-casualty insurance cycles. The primary implications concern industry capacity and the difference between the price of insurance and noncapital costs, referred to here as the price-payment margin (PPM). Capacity constraint theories predict that low capacity will lead to higher PPMs and that capacity growth will follow PPM increases as insurers rebuild capacity. Price-payment margin and capacity series are constructed using industry time series for 1949-90. The estimation finds that PPM growth varies inversely with capacity at the beginning of the period and also inversely with changes in capacity. In addition, declines in capacity are associated with PPM growth next period, while increases in capacity generally have no significant effect on next period's PPM growth. Furthermore, current capacity growth is positively correlated with last period's PPM growth. Copyright 1994 by the University of Chicago. Date: 1994 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:ucp:jlawec:v:37:y:1994:i:2:p:349-77 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Law & Economics is edited by Dennis W. Carlton, Austan Goolsbee, Randall S. Krosner, Douglas Lichtman and Edward A. Snyder More articles in Journal of Law & Economics from University of Chicago Press |
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