Underwriting Cycles in Asia-Pacific Countries: A New Approach (Paper for the NICOID 2016)

This study examines the presence of underwriting cycles in Asia-Pacific insurance industry. First of all we described previous studies about underwriting cycles in that region. We confirmed the presence of such a cycles in South Korea, using classical way of identifying underwriting cycles, i.e. based on yearly data and using a second-order autoregressive model – AR(2). We also present a new approach, i.e. the idea of deviation cycles (this method involves fitting a trend to the indicators and analyzing the deviations from this trend) using quarterly data for Australia and Hong Kong. With that method we also found cycles, however they were shorter than classical ones (about 2-4 years vs. 6-11 years). We tested some relations between profitability (profit ratio) and other variables (loss ratios, claims, premiums, capacity and also GDP), however the results of our analysis support only partly our hypothesis.

Keywords:

Underwriting Cycles , Deviation cycles , Asia Pacific Insurance Industry