Underwriting Cycle

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Underwriting Cycle

The business cycle in the insurance sector. In the underwriting cycle, insurers compete with each other for clients, resulting in falling premiums and low underwriting standards. Insurers therefore write more policies than they can reasonably risk, which results in higher underwriting standards and premiums. Eventually, insurers write too few premiums to sustain and the cycle begins again.
References in periodicals archive ?
We extend the literature that examines the underwriting cycles in several ways.
Francois Outreville, 1987, An International Analysis of Underwriting Cycles in Property-Liability Insurance, Journal of Risk and Insurance, 54: 246-262.
Francois, Outreville, 1987, An International Analysis of Underwriting Cycles in Property-Liability Insurance, Journal of Risk and Insurance, 54:246-262.
David and Francois Outreville, 1987, An International Analysis of Underwriting Cycles, Journal of Risk and Insurance, 54: 246-262.
He also provides discussion of possible policy responses aimed at mitigating underwriting cycles. Chris Daykin and G.
An additional qualification is that our results do not directly take into account the finding of underwriting cycles research that underwriting profits follow a second-order autoregressive process (Brockett and Witt, 1982; Venezian, 1985).
Fields and Venezian (FV) (1989) note a problem with the all-lines underwriting betas estimated in this study if underwriting cycles exist for individual lines, resulting in aggregation bias.
It directly results in what are known as underwriting cycles. It's also an important reason why the number of insurance insolvencies sometimes spikes in periods following catastrophes or market disruptions.
Firm-Level Data Analysis of the Effects of Net Investment Income on Underwriting Cycles: An Application of Simultaneous Equations, The Journal of Insurance issues, 28, 14-32.
The natural conclusion is that higher-performing large carriers have balanced out underwriting cycles to deliver economic value, but to get growth they must have the market insights to assess which baskets within the portfolio they should place their bets on.
The capacity constraint theory views insurance markets as characterized by real frictions that involve underwriting cycles by temporarily reducing the industry capacity to insure risks, which implies that the capacity is negatively related to the underwriting profits.
The underwriting cycles for specialty insurance products are currently in a difficult market phase, resulting in higher underwriting profits for insurers.