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External Impacts on the Property-Liability Insurance Cycle

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Author Info
Grace, M. F.
J. L. Hotchkiss

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Abstract

Traditionally, underwriting performance is considered to be a function of industry specific institutions. Using quarterly data from 1974 to 1990, we provide evidence of a long run linkage between the general economy and the underwriting performance as measured by the combined ratio. Using cointegration techniques we estimate the long run relationship between the general economy as measured by real gross domestic product, the short-term interest rate, and inflation. We then estimate the short-run linkage between the industry and the general economy using vector autoregression techniques and find that, although the property-liability industry is linked to the long run performance of the national economy, short run shocks in economic variables have little effect on the combined ratio.

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Publisher Info
Paper provided by Risk and Insurance Archive in its series Working Papers with number 020.

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Date of creation: Nov 1993
Date of revision: Feb 1995
Handle: RePEc:wop:riskar:020

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Related research
Keywords: Property-Liability Cycle; business cycle;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Smith, Michael L, 1989. "Investment Returns and Yields to Holders of Insurance," Journal of Business, University of Chicago Press, vol. 62(1), pages 81-98, January. [Downloadable!] (restricted)
  2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  3. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
  4. Robert T. McGee, 1986. "The cycle in property/casualty insurance," Quarterly Review, Federal Reserve Bank of New York, issue Fall, pages 22-30.
  5. Janice L. Boucher, 1991. "Stationary representations, cointegration, and rational expectations with an application to the forward foreign exchange market," Working Paper 91-6, Federal Reserve Bank of Atlanta.
  6. Claudia Goldin & Robert A. Margo, 1989. "Wages, Prices, and Labor Markets Before the Civil War," NBER Working Papers 3198, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Harrington, Scott E & Danzon, Patricia M, 1994. "Price Cutting in Liability Insurance Markets," Journal of Business, University of Chicago Press, vol. 67(4), pages 511-38, October. [Downloadable!] (restricted)
  8. James MacKinnon, 1990. "Critical Values for Cointegration Tests," University of California at San Diego, Economics Working Paper Series 90-4, Department of Economics, UC San Diego. [Downloadable!]
  9. Hall, S G, 1986. "An Application of the Granger & Engle Two-Step Estimation Procedure to United Kingdom Aggregate Wage Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 229-39, August.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Catherine Bruneau & Nadia Sghaier, 2008. "Les cycles de souscription de l’assurance non vie en France," EconomiX Working Papers 2008-6, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  2. Feng Guo & Hung-Gay Fung & Ying Huang, 2009. "The Dynamic Impact of Macro Shocks on Insurance Premiums," Journal of Financial Services Research, Springer, vol. 35(3), pages 225-244, June. [Downloadable!] (restricted)
Statistics
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