A Comparison of Property/Casualty Insurance Financial Pricing Models

A number of property/casualty insurance pricing models that 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/casualty insurance financial pricing techniques to a single hypothetical, but representative, company. Both company and economic parameters are varied in order to examine the sensitivity of 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.