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Ordinary and Markov-Switching Autoregressive Models for Firm-Level Underwriting Data

Author

Listed:
  • Feng Frank Y.

    (School of Finance and Shanghai Institute of International Finance and Economics, Shanghai University of Finance and Economics, Shanghai, China)

  • Powers Michael R.

    (Department of Finance, School of Economics and Management, and Schwarzman College, Tsinghua University, 386C Weilun Building, Beijing100084, China)

Abstract

For many decades, the analysis of underwriting-profitability regimes (i. e. successive “hard” and “soft” markets) has formed an important topic in insurance research. In the present article, we study the characteristics of firm-level underwriting results by applying both ordinary and Markov-switching autoregressive models to data from individual U.S. property-liability companies. The research employs both univariate and multivariate methods. Our analysis argues against the existence of distinct, firm-level underwriting regimes in the U.S. property-liability market, but offers evidence of cross-company interactions over time.

Suggested Citation

  • Feng Frank Y. & Powers Michael R., 2019. "Ordinary and Markov-Switching Autoregressive Models for Firm-Level Underwriting Data," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 13(2), pages 1-16, July.
    • Handle: RePEc:bpj:apjrin:v:13:y:2019:i:2:p:16:n:4
    DOI: 10.1515/apjri-2018-0031
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    References listed on IDEAS

    as
    1. Chao-Chun Leng, 2006. "Stationarity and stability of underwriting profits in property-liability insurance: Part I," Journal of Risk Finance, Emerald Group Publishing, vol. 7(1), pages 38-48, January.
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    6. Ursina B. Meier & J. François Outreville, 2006. "Business cycles in insurance and reinsurance: the case of France, Germany and Switzerland," Journal of Risk Finance, Emerald Group Publishing, vol. 7(2), pages 160-176, March.
    7. Scott E. Harrington & Tong Yu, 2003. "Do Property‐Casualty Insurance Underwriting Margins Have Unit Roots?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(4), pages 715-733, December.
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