Do Underwriting Cycles Matter? An Analysis Based on Dynamic Financial Analysis
Journal
Variance
ISSN
1940-6444
ISSN-Digital
1940-6452
Type
journal article
Date Issued
2012-01-09
Author(s)
Abstract
The aim of this paper is to analyze the impact of underwriting cycles on the risk and return of non-life insurance companies. We integrate underwriting cycles in a dynamic financial analysis framework using a stochastic process, specifically, the Ornstein-Uhlenbeck process, which is fitted to empirical data and used to analyze the impact of these cycles on risk and return. We find that underwriting cycles have a substantial influence on risk and return measures. Our results have implications for managers, regulators, and rating agencies that use such models in risk management, e.g., to determine risk-based capital requirements.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Casualty Actuarial Society
Publisher place
Arlington, VA
Volume
6
Number
2
Start page
131
End page
142
Pages
12
Subject(s)
Division(s)
Eprints ID
238389