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Stationarity and stability of underwriting profits in property‐liability insurance

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  • Chao‐Chun Leng

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.

Suggested Citation

  • Chao‐Chun Leng, 2006. "Stationarity and stability of underwriting profits in property‐liability insurance," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 7(1), pages 38-48, January.
    • Handle: RePEc:eme:jrfpps:15265940610637799
    DOI: 10.1108/15265940610637799
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    Cited by:

    1. Shi‐jie Jiang & Jeffrey Tzu‐Hao Tsai & Feiyun Xiang, 2023. "Dynamics of underwriting profits in the US market: Payout patterns and regulation effects," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3100-3118, July.

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