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The Nature of the Loss Ratio in Property-Casualty Insurance

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  • Peter M. Ellis

Abstract

The aggregate loss ratio in the United States stock property-casualty insurance industry is represented with an autoregressive AR(3) model. It is demonstrated with a Monte Carlo simulation that the loss ratio is quite unstable. Annual growth has been strong for both premium volume and losses, but the loss ratio is found to fluctuate unsteadily as an AR(3) process. Also, there is a continuing upward drift to the loss ratio that cannot continue without bringing failed loss coverage to the industry.

Suggested Citation

  • Peter M. Ellis, 1998. "The Nature of the Loss Ratio in Property-Casualty Insurance," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 21(1), pages 46-62.
    • Handle: RePEc:wri:journl:v:21:y:1998:i:1:p:46-62
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    File URL: http://www.insuranceissues.org/PDFs/212E.pdf
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    Cited by:

    1. Lucia Spotorno & Ornella Moro, 2020. "Do bank-affiliated P&C insurers perform better? An empirical investigation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(2), pages 225-255, April.

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