Underwriting Cycle

[r_v.s]

I remember posting this question! but i'm now unable to find it....
Im really sorry if I'm posting this a second time...

I'd like to know if there is the equivalent of a GI Underwriting cycle in life insurance too...

 

[Shillington]

I remember posting this question! but i'm now unable to find it....
Im really sorry if I'm posting this a second time...

I'd like to know if there is the equivalent of a GI Underwriting cycle in life insurance too...

I don't work in Life Insurance so whatever I'm saying could be rubbish.

I would have thought that any effects of underwriting cycles in Life Insurance would be subdued by the terms of the contracts. Life insurance contracts are generally over a long term (5+ years). Because of this the company can expect to receive steady premium income from the contract over this term. Therefore any differences in business volumes will be "smoothed" by this effect. Note also that because of the term, management can "fine tune" their new business volumes by changing marketing strategies etc.

 

[Calum]

In theory, no, because pricing is based on mortality experience/capital costs and expected cashflows. You don't therefore have the same boom and bust effect that you see in GI.

I would probably not add in the exam that there is certainly a second order effect, especially in reinsurance pricing, which arises because companies attempt to trade profitability for market share. I would suggest the UK market, for example. may be at a low point in pricing through this effect.