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New NCCI Report: Understanding What Drives the Underwriting Cycle

Boca Raton, FL - A new NCCI research report examines the financial performance of the property and casualty (P&C) industry as it relates to the business cycle, economic trends and investment income.

The financial performance of the property and casualty (P&C) industry features both a little-recognized set of trends and a widely discussed series of cycles.

The NCCI research paper, Understanding What Drives the Underwriting Cycle examines both and concludes that each reflects a predictable response to a common driver-the business cycle and economic trends in general and investment income in particular.

The research includes a description of the conceptual link between underwriting and investment results. It is the challenge of trying to maintain a reasonable balance between these two fundamental measures of financial performance that drives the underwriting cycle.

In summary the paper shows:

  • Cash flow underwriting in pursuit of investment gains is more of a driver of the underwriting cycle than excess capacity.
  • As investment gain opportunities deteriorate, disciplined profitable underwriting results materialize.
  • As interest rates decrease, hard markets follow. As interest rates increase, soft markets follow.
  • Underwriting results are the key driver of the direction of return on surplus.
A free copy of the study is available here: NCCI: Understanding What Drives the Underwriting Cycle (PDF)

Source: NCCI


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