Stationarity and stability of underwriting profits in property‐liability insurance

Chao‐Chun Leng

Journal of Risk Finance, 2006, vol. 7, issue 1, 38-48

Abstract: Purpose - To examine whether the properties of the combined‐ratio series, an indicator of underwriting profitability in property‐liability insurance, have changed over time. Design/methodology/approach - Using the autocorrelation function (ACF) and partial autocorrelation function (PACF), we check whether combined ratios are stationary. Findings - Underwriting profit has worsened in recent years, and combined ratios are non‐stationary. This characteristic of combined ratios needs further analysis for its impact on underwriting cycles. Practical implications - Traditional concepts of underwriting cycles, such as predictable cycle lengths and trends, may have changed. Originality/value - The possibility of a non‐stationary combined‐ratio series is recognized, and the possible existence of non‐stationarity and breaks in combined ratios is introduced.

Keywords: Underwriting; Property insurance; Insurance liability (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265940610637799

DOI: 10.1108/15265940610637799

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