Underwriting Apophenia and Cryptids: Are Cycles Statistical Figments of our Imagination?

This paper re-examines the evidence in favour of the existence of underwriting cycles in property and casualty insurance and their economical significance. Using a meta-analysis of published papers in the area of insurance economics, we show that the evidence supporting the existence of underwriting cycles is misleading. There is, in fact, little evidence in favour of insurance cycles with a linear autoregressive character. This means that any cyclicality in firm profitability in the property and casualty insurance industry is not predictable in a classical econometric framework. It follows that pricing in the property and casualty insurance industry is not incompatible with that of a competitive market

International Longevity Risk Pooling

This paper studies the problem of an insurance company that has to decide whether to expand her portfolio of policies selling contracts written on a foreign population. We quantify diversification across populations and cohorts using a parsimonious continuous-time model for longevity risk. We present a calibrated example, based on annuity portfolios of UK and Italian males aged 65–75. We show that diversification gains, evaluated as the reduction in the portfolio risk margin following the international expansion, can be non-negligible