Abstract
Insurance business (underwriting) cycles are typical of non-life insurance. The cycle consists of phases of low and high prices of insurance products and indicators of financial condition. According to theory, underwriting cycles are long, in developed countries – even 8–10 years. On the Polish market, up to now, the cycle survey has been limited by the time horizon of available data (unified data since 1999). Currently, the scope of data is much longer, which allows to compare the results of earlier studies (from 2010 to 2013) with newer ones, to check whether the cycle lengths have reached values similar to observed in developed markets. Knowledge of these cycles can support the risk management process of an insurance company. The purpose of the research is to analyse the occurrence of underwriting cycles in liability insurance on the Polish market (cumulated data for insurance companies operating on the Polish market), as they are particularly sensitive to changes in legal regulations (numerous on the Polish market in 2007–2012). It will be examined whether the cycles occur and, if so, what their length is. The study will use the second-order autoregressive model AR(2). Model coefficients are estimated by least squares method. The study confirmed the presence of cycles for groups: 10 (MTPL insurance), 5–6-year cycles confirmed in most of the ratios analysed; 11 (third-party liability insurance, arising out of the possession and use of aircraft), no cycles found except combined ratio; 12 (insurance of civil liability for sea and inland navigation), cycles observed in claims, profitability and combined ratio; and 13 (general third-party liability insurance not included in groups 10–12) of the non-life insurance sector, cycles observed only in dynamics ratios.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Act of 11 September 2015 on insurance and reinsurance activities. Dz.U. 2015 poz. 1844.
Act of 23 April 1964 - Civil Code. Dz.U. 1964 nr 16 poz. 93.
Act of 23 October 2018 amending the Act on compulsory insurance, the Insurance Guarantee Fund and the Polish Motor Insurers' Bureau Dz.U. 2018 poz. 2448.
Annual bulletin. Insurance market - for years 1999-2018, Polish Supervisory Authority, available at https://www.knf.gov.pl/en/REPORTS_AND_ANALYSIS/Insurance
Boyer MM, Owadally I (2015) Underwriting Apophenia and cryptids: Are cycles statistical figments of our imagination? Geneva Papers Risk Insurance – Issues Pract 40(2):232–255. https://doi.org/10.1057/gpp.2014.12
Boyer MM, Jacquier E, Van Norden S (2012) Are underwriting cycles real and forecastable? J Risk Insur 79:995–1015
Chen R, Wong KA, Lee HC (1999) Underwriting cycles in Asia. J Risk Insur 66(1):29–47
Circular letter from the Polish Financial Supervision Authority of 28 September 2015 (reference number DNU/606/6/2/1/AW/2015 available at: https://www.knf.gov.pl/knf/pl/komponenty/img/kalkulacja_wysokosci_skladki_ubezpieczeniowej_28-09-15_42937.pdf
Cummins JD, Outreville JF (1987) An international analysis of underwriting cycles in property-liability insurance. J Risk Insur 54:246–262. https://doi.org/10.2307/252856
Cwalińska-Weychert Z, Monkiewicz M, Sordyl G (2014) Działalność odszkodowawcza Ubezpieczeniowego Funduszu Gwarancyjnego na tle rozwiązań europejskich. Prawo Asekuracyjne 3(80):102–116
Dąbrowski T, Pomarański S, Wiercioch K, et al (2017) Information on compulsory third party liability insurance for motor vehicle owners - changes in liability, amount of damages and premium amount UKNF Warszawa.
De Witt G (1979) Cycles in insurance: A Review of past researches and proposals of further studies. Etudes et Dossiers 33
Doherty NA, Garven JR (1995) Insurance cycles: Interest rates and the capacity constraint model. J Bus 68:383. https://doi.org/10.1086/296669
Doherty NA, Kang HB (1988) Interest rates and insurance price cycles. J Banking Finan 12:199–214. https://doi.org/10.1016/0378-4266(88)90035-0
Dziechciarz J (ed) (2002) Ekonometria: metody, przykłady, zadania. Wyd. Akademii Ekonomicznej im. Oskara Langego, Wrocław
Feng F, Powers M (2019) Ordinary and Markov-switching autoregressive models for firm-level underwriting data. Asia-Pacific J Risk Insur 13(2). https://doi.org/10.1515/apjri-2018-0031
Grace MF, Hotchkiss JL (1995) External impacts on the property-liability insurance cycle. J Risk Insur 62:738. https://doi.org/10.2307/253593
Haley J (2017) Using directional bit sequences to reveal the property-liability underwriting cycle as an algorithmic process. Algorithmic Finance 6(1–2):3–21. https://doi.org/10.3233/AF-170172
Harrington SE, Niehaus G, Yu T (2013) Insurance price volatility and underwriting cycles. In: Dionne G (ed) Handbook of insurance. Springer, New York. https://doi.org/10.1007/978-1-4614-0155-1_23
Helten E (1977) Business cycles and insurance. Geneva Pap Risk Insur Issues Pract 2:53–75. https://doi.org/10.1057/gpp.1977.14
Jędrzychowska A, Kowalczyk-Rólczyńska P, Poprawska E (2013) Motor insurance market in Poland in connection to European trends. Ekonomika: mokslo darbai / Vilniaus Universitetas 92:3
Lamm-Tennant J, Weiss MA (1997) International insurance cycles: Rational expectations/institutional intervention. J Risk Insur 64:415. https://doi.org/10.2307/253758
Lei Y, Browne M (2015) Underwriting strategy and the underwriting cycle in medical malpractice insurance. Geneva Papers Risk Insur – Issues Pract 42:152–175. https://doi.org/10.1057/gpp.2015.24
Lemkowska M. (2007) Wybrane determinanty wahań koniunkturalnych na rynku ubezpieczeniowym w Polsce w latach 1993-2006. Wiadomości Ubezpieczeniowe 9/10.
Leng C, Meier UB (2006) Analysis of multinational underwriting cycles in property-liability insurance. J Risk Finan 7:146–159. https://doi.org/10.1108/15265940610648599
Manikowski P. (2013) Insurance cycles in market economy. Poltext Warsaw.
Manikowski P, Weiss MA (2013) The satellite insurance market and underwriting cycles. Geneva Risk Insur Rev 38:148–182. https://doi.org/10.1057/grir.2013.2
Meier UB (2006) Multi-national underwriting cycles in property-liability insurance: Part I – Some theory and empirical results. J Risk Finan 7:64–82. https://doi.org/10.1108/15265940610637816
Meier UB, François Outreville J (2006) Business cycles in insurance and reinsurance: The case of France, Germany and Switzerland. J Risk Finan 7:160–176. https://doi.org/10.1108/15265940610648607
Meier UB, Outreville JF (2010) Business cycles in insurance and reinsurance: International diversification effects. Appl Finan Econ 20(8):659–668
Mocek M (2009) Wahania koniunktury na polskim rynku ubezpieczeniowym w 2008 roku w świetle wyników testu koniunktury. Wiadomości Ubezpieczeniowe 2009(2). In: Polska Izba Ubezpieczeń.
Mormino C (1979) Insurance cycles: An Italian experience. Etudes et Dossiers 33
Owadally I, Zhou F, Otunba R, Lin J, Wright D (2019) Time series data mining with an application to the measurement of underwriting cycles. North Am Actuarial J 23(3):469–484. https://doi.org/10.1080/10920277.2019.1570468
Poprawska E, Jędrzychowska A (2011) Business cycles in the Motor Insurance in Poland. Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu Ekonomia 14:281–290
Poprawska E, Jędrzychowska A, Kwiecień I (2020) The exhaustion of amounts of cover (guarantee sums) in the compulsory third party liability insurance of motor vehicle owners (MTPL) – The current problems. Presentation Wroclaw Con Finance 22(09):2020
The Act of May 22, 2003 on compulsory insurance, the Insurance Guarantee Fund and the Polish Motor Insurers' Bureau Dz.U. 2003 nr 124 poz. 1152.
Venezian EC (1985) Ratemaking methods and profit cycles in property and liability insurance. J Risk Insur 52:477. https://doi.org/10.2307/252782
Venezian EC (2006) The use of spectral analysis in insurance cycle research. J Risk Finan 7:177–188. https://doi.org/10.1108/15265940610648616
Wang N, Murdock M (2019) A dynamic model of an insurer: Loss shocks, capacity constraints and underwriting cycles. J Risk Finan 20(1):82–93. https://doi.org/10.1108/JRF-03-2018-0051
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this paper
Cite this paper
Poprawska, E. (2022). Insurance Business Cycles in Liability Insurance – The Case of the Polish Market. In: Bem, A., Daszynska-Zygadlo, K., Hajdíková, T., Jáki, E., Ryszawska, B. (eds) Sustainable Finance in the Green Economy . ICFS 2019. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-81663-6_11
Download citation
DOI: https://doi.org/10.1007/978-3-030-81663-6_11
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-81662-9
Online ISBN: 978-3-030-81663-6
eBook Packages: Economics and FinanceEconomics and Finance (R0)