A Comparison of Property-Liability Insurance Financial Pricing Models

A number of property-liability insurance pricing models which attempt to integrate underwriting and investment performance considerations have been proposed, developed, and/or applied. Generally, empirical tests of these models have involved examining how well the models fit historical data at an industry level. This paper demonstrates how to apply a variety of property-liability insurance financial pricing techniques to a single hypothetical, but representative, company. Both company and economic parameters are varied in order to examine the sensitivity o indicated underwriting profit margins from these techniques to different company situations and economic environments, and to highlight the differences between the techniques at a practical level. This paper also serves as a practical guide for applying these models, in order to encourage more widespread use of these approaches.