IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v20y2010i8p659-668.html
   My bibliography  Save this article

Business cycles in insurance and reinsurance: international diversification effects

Author

Listed:
  • Ursina Meier
  • J. Francois Outreville

Abstract

This article examines the existence of a cyclical pattern in property-liability insurance for the US over the recent period 1982 to 2001 in connection with the international price of reinsurance during the same period. The fluctuations in the price of reinsurance during the past 20 years have been documented recently in the business literature. If the price of reinsurance decreases, reinsurance becomes more affordable for insurance companies and this will be reflected in more capacity, price competition and finally an increase in the loss and combined ratio. Our study is using a price index developed recently for this period of time and based on Swiss Re's global book of business. We show that the reinsurance price index exhibits a significant cycle of almost nine years. The beginning of our observation period starting in 1982 coincides with previously found structural breaks in the Loss Ratio (LR) series. We find that inclusions of the reinsurance price and/or the Money Market (MM) rate do not contribute much to the explanation of the LR in property-liability insurance, whereas the LR does help to explain the fluctuations in the reinsurance price index. This supports our hypothesis of the international diversification effects of reinsurance operation and a proliferation of cycles or large insurance shocks through international reinsurance services.

Suggested Citation

  • Ursina Meier & J. Francois Outreville, 2010. "Business cycles in insurance and reinsurance: international diversification effects," Applied Financial Economics, Taylor & Francis Journals, vol. 20(8), pages 659-668.
  • Handle: RePEc:taf:apfiec:v:20:y:2010:i:8:p:659-668
    DOI: 10.1080/09603100903459931
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100903459931
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giovanni Millo, 2016. "The Income Elasticity of Nonlife Insurance: A Reassessment," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 335-362, June.
    2. Ning Wang & Yiling Deng, 2016. "Market responses to loss shocks and insurers' post-catastrophe performance in the US property-casualty insurance market," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(3), pages 231-246.
    3. Catherine Bruneau & Nadia Sghaier, 2014. "Cyclicity in the French Property," Working Papers 2014-47, Department of Research, Ipag Business School.
    4. Tetin, Ilya, 2015. "Underwriting cycle in Russia and macroeconomic indicators," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 65-83.
    5. Heni Boubaker & Nadia Sghaier, 2014. "How Do the Interest Rate and the Inflation Rate Affect the Non-Life Insurance Premiums ?," Working Papers 2014-282, Department of Research, Ipag Business School.
    6. Jean-Fran├žois Outreville, 2014. "The Meaning of Risk? Insights from The Geneva Risk and Insurance Review," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(4), pages 768-781, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:20:y:2010:i:8:p:659-668. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.