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Competition-Originated Cycles and Insurance Strategies

Published online by Cambridge University Press:  09 August 2013

Vsevolod K. Malinovskii
Vsevolod K. Malinovskii*
Affiliation:
Central Economics and Mathematics Institute (CEMI), 117418, Nakhimovskiy prosp., 47, Moscow, Russia, and Finance Academy, 125468, Leningradskiy prosp., 49, Moscow, Russia, E-Mail: malinov@orc.ru, malinov@mi.ras.ru, URL: http://www.actlab.ru
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Abstract

An insurance company entering the property and liability insurance market at the high point of the insurance cycle may decide to slash premiums to gain an advantageous market share. Such aggressive intrusion may call forth a concerted industry response, producing a severe decline in the insurance market price. This can ruin some companies, and agrees with the observation that the insurance cycles are correlated with clustered insolvencies. This paper addresses a quantitative analysis of competition-originated cycles; it explores an interplay of rational aggressive and defensive strategies in the multi-period Lundberg-type controlled risk model.

Keywords

Underwriting cyclescompetitionyears of soft and hard marketmultiperiod insurance processsolvency and subsistence
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 40 , Issue 2 , November 2010 , pp. 797 - 843
Copyright
Copyright © International Actuarial Association 2010

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