Study on the Existence of Underwriting Cycles in Chinese Non-life Market

Underwriting cycle involves from the cyclical fluctuations in insurance supply a nd demand. And the main features of underwriting cycle are the seasonal changes of underwriting profit and premium rates. The data in this paper is annual data from 1980 to 2006 in Chinese market. This study uses two methods: second-order autoregressive model and spectral analysis to test the existence of underwriting cycles in the entire non-life insurance market of China.We find that cycles do exist: the long cycle is 12.5-16.7 years and the middle cycle is 5.6 years. The results keep consistent with the ones in Asian non-life insurance market.