The Relationship Between Underwriting Profit and the Surplus Ratio: A Model [Review]

Mr. Niswanders' paper attempts to measure the trade-off between greater underwriting profits (a less competitive position) and surplus growth and thereby address the question as to whether a company's profit goals and competitive goals are consistent. The question is an important one to understand and, if possible, to answer. Unfortunately, the model as developed does not answer the question due to design flaws. This review will discuss where the design is flawed, both as to model structure and basic assumptions, as well as discussing the restraints in applying any financial model.