External impacts on the property-liability insurance cycle
Traditionally, underwriting performance is considered to be a function of industry-specific institutions. Using quarterly data from 1974 through 1990, we provide evidence of a long-run link 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 link between the industry and the general economy using vector auto-regression technniques and find that, although the property-liability insurance 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.
|Date of creation:||1995|
|Date of revision:|
|Publication status:||Published in The Journal of Risk and Insurance No. 4.Vol. 6(1995): pp. 738-754|
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Web page: http://mpra.ub.uni-muenchen.de
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