External Impacts on the Property-Liability Insurance Cycle
J. OF RISK AND INSURANCE, Vol. 62 No. 4, December 1995
Posted: 19 May 1998
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 autoregression techniques 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.
JEL Classification: G22
Suggested Citation: Suggested Citation