A Model of the Underwriting Cycle in the Property/Liability Insurance Industry
构建了一个正式模型，解释财产责任保险业利润约六年周期的成因，认为利润反馈影响盈余进而改变供给，产生动态周期，对保险业研究者有用。
A number of researchers have noted the existence of a cycle with a period of approximately six years in the profits of the property-liability insurance industry (Cummins and Outreville [2], Doherty and Kang [3], Simmons and Cross [5], Smith and Gahin [6], Venezian [8]). Although it has been recognized that a second order autoregressive equation will generate a six year cycle under some parameterizations, there has not been a satisfying theoretical derivation of such a relationship. The usual explanation (Stewart [7], Wilson [9]) for the existence of the cycle is that profits increase surplus (capacity), leading to aggressive marketing (i.e., more liberal underwriting standards) and declining profitability, which leads to a decline in surplus followed by increased profitability. The purpose of this paper is to develop a formal model, consistent with this explanation, which yields a second order difference equation in profits. A simple specification is provided which generates a six year cycle in profitability. Although this explanation has often been described as a cobweb model, the dynamics do not rest on supply being incorrectly based on last period's price. Rather, the key feature is that profits feed back into surplus, leading to an offsetting shift in supply due to a change in the required risk premium. Several competing hypotheses have recently been put forward to explain the cycle (see Cummins and Outreville [2] for a review). Ideally, however, noting the term underwriting cycle, the reported changes in underwriting standards over the course of the cycle need to be explained. In addition, the long history associated with the cycle argues for an explanation which points to the very basic economic fundamentals of the industry. Thus, the model developed herein excludes any consideration of expenses, taxes, investment income, interaction with the capital market, or ratemaking methodology; rather, the hypothesis is that the dynamics of the cycle derive from the fact that profits