Underwriting Cycle and Ruin Probability

This paper presents a model for analyzing the impact of underwriting cycles on an insurer’s surplus. The model allows the insurer to vary its security loading in response to the cycles, with a strategy parameter that indicates the extent to which the insurer follows the loading which prevails in the market. The insurer’s claim rate is also allowed to vary to reflect exposure changes that result from the insurer’s strategy.

It analyzes ruin probabilities using both simulation and a Lundberg-type upper bound which is developed in the paper, and finds that the latter is suitable and convenient for comparing ruin probabilities under the different insurer strategies.

http://www.soa.org/library/proceedings/arch/2008/arch-2008-iss2-jones.pdf