U.S. Property-Casualty: Underwriting Cycle Modeling and Risk Benchmarks

By Shaun S. Wang, John A. Major, Hucheng (Charles) Pan, Weng Kah Leong

Download PDF of Full Text

Abstract

The risk benchmarks and underwriting cycle models presented here can be used by insurers in their enterprise risk management models. We analyze the historical underwriting cycle and develop a regime-switching model for simulating future cycles, and show its superiority to an utoregressive approach. We compute benchmarks for pricing and reserving risks by line of business and by industry segments (large national, super regional, and small regional). We also compute the historical correlation of the loss ratio, as well as the correlation of changes in the reserve estimate between lines of business.

Keywords: Underwriting cycle, regime-shifting, benchmark, pricing risk, reserving risk, correlation, enterprise risk management

Related Documents:

Citation

Wang, Shaun S., John A. Major, Hucheng (Charles) Pan, and Weng Kah Leong, "U.S. Property-Casualty: Underwriting Cycle Modeling and Risk Benchmarks," Variance 5:2, 2011, pp. 91-114.

Taxonomy Classifications


Subscribe to the RSS Feed

Email List

Sign up today for the Variance e-mail list and receive updates about new issues, articles, and special features.

Mission Statement

Variance (ISSN 1940-6452) is a peer-reviewed journal published by the Casualty Actuarial Society to disseminate work of interest to casualty actuaries worldwide. The focus of Variance is original practical and theoretical research in casualty actuarial science. Significant survey or similar articles are also considered for publication. Membership in the Casualty Actuarial Society is not a prerequisite for submitting papers to the journal and submissions by non-CAS members is encouraged.