External Impacts on the Property-Liability Insurance Cycle

J. OF RISK AND INSURANCE, Vol. 62 No. 4, December 1995

Posted: 19 May 1998

See all articles by Martin F. Grace

Martin F. Grace

Temple University - Risk Management & Insurance & Actuarial Science

Julie L. Hotchkiss

Federal Reserve Bank of Atlanta; Georgia State University - Department of Economics

Abstract

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

Grace, Martin F. and Hotchkiss, Julie L., External Impacts on the Property-Liability Insurance Cycle. J. OF RISK AND INSURANCE, Vol. 62 No. 4, December 1995. Available at SSRN: https://ssrn.com/abstract=7102

Martin F. Grace (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

Julie L. Hotchkiss

Federal Reserve Bank of Atlanta ( email )

Research Department
1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8198 (Phone)
404-498-8058 (Fax)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

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