Underwriting Cycles in Asia

Abstract

This study examines the presence and causes of the underwriting cycle in Asia. It also compares the characteristics of the underwriting cycle in emerging markets in Asia with its characteristics in developed markets. We found that, first, second-order autoregression results support the existence of the underwriting cycle in Asia. Second, the analysis of premium changes provides some support for the rational expectations/institutional intervention hypothesis. Third, although there is little evidence to prove that the stock markets and interest rates have caused the cycle in Asia, the results seem to indicate that the underwriting cycles in Asian countries are mainly related to the pace of the economic growth in those countries. Fourth, our results with respect to the factors affecting the changes in premiums generally differ from those found for the developed nations.