FOCUS ON INSURANCE "CYCLES": PART II Analysis of multinational underwriting cycles in property-liability insurance

Purpose - The paper sets out to use the loss ratio series of Switzerland, Germany, the USA and Japan, to test whether underwriting cycles still exist internationally and to identify possible structural changes. Design/methodology/approach - Based on financial theory and insurance pricing theory, co-integration analysis was performed to check possible causes of structural changes. Findings - All four countries have breaks in different years. This result leads to the hypothesis that the factors affecting underwriting cycles are mainly country-specific, such as economic environment and regulations, rather than global/international. Although the financial theory and the insurance pricing theory suggest that the loss ratio series should be co-integrated with the interest rate series with co-integrating coefficient 21, the empirical results do not support the theories. Originality/value - More detailed analysis for the time series characteristics for countries other than the USA is presented to investigate the possible existence of underwriting cycles.