Underwriting Cycles in the Property-Casualty Insurance Industry

The president of a major insurance brokerage firm recently observed that: "During the past 25 years, with one minor variation, three years of underwriting gains have been followed precisely by three years of underwriting losses. "I This view of cyclical patterns in the industry is confirmed by the trade literature which calls it the underwriting cycle. Underwriting profits are roughly the premiums earned during the period less the incurred losses, loss adjustment expenses and other underwriting expenses. Although exact specifications and timing are debated, the tendency for underwriting profits to fluctuate in a regular cycle is almost universally accepted.