Stationarity and stability of underwriting profits in property-liability insurance: Part I

Purpose – To examine whether the properties of the combined-ratio series, an indicator of underwriting profitability in property-liability insurance, have changed over time. Design/methodology/approach – Using the autocorrelation function (ACF) and partial autocorrelation function (PACF), we check whether combined ratios are stationary. Findings – Underwriting profit has worsened in recent years, and combined ratios are non-stationary. This characteristic of combined ratios needs further analysis for its impact on underwriting cycles. Practical implications – Traditional concepts of underwriting cycles, such as predictable cycle lengths and trends, may have changed. Originality/value – The possibility of a non-stationary combined-ratio series is recognized, and the possible existence of non-stationarity and breaks in combined ratios is introduced.