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Commercial Property Casualty Market Index Survey – Definition

Cite this article as:"Commercial Property Casualty Market Index Survey – Definition," in The Business Professor, updated September 20, 2019, last accessed August 15, 2020, https://thebusinessprofessor.com/lesson/commercial-property-casualty-market-index-survey-definition/.

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Commercial Property Casualty Market Index Survey Definition

Commercial property casualty market index survey is a market report designed to examine insurance agents and brokers. The report is meant to give out information regarding the performance of the market on a quarterly basis. The report covers data such as premium rates in various commercial accounts. In addition, it keeps track of regional trends as well as providing overviews of the market conditions, including trends in price.

A Little More on What Is Commercial Property/Casualty Market Index Survey

The quarterly survey is usually carried out to reflect variation in the damaged market and commercial property market. The survey may include things such as:

  • Business account’s premium rates. This applies to all sizes of accounts including small, medium, and large.
  • Track regional trends
  • Current members’ post comments on the status of the market

Initially, the survey results are usually dispersed in the media mostly as a press release. The purpose of disseminating the results is to ensure that officials are educated on commercial damages. The CPCMS was founded in 1990, and in this kind of investigations, it is the longest-serving. 80% of participants contributed to the survey of the U.S. insurance premium. A biannual study known as Employee Benefits Market Index was also conducted during the survey.

Note that there is a difference between commercial and residential property. The commercial property requires zoning that is separate from a residential property because it does generate income. It is mandatory to protect commercial property from damage just as the residential property is protected.

Examples of commercial property include:

  • Retail stores
  • Industrial zones
  • Apartments

Commercial Property Insurance Report Example

Let’s assume that there is a broken pipe passing through a food store, and grocery toilet, which causes the shop to be flooded. Casualty insurance takes care of such types of damages. The period covered is always extensive, however, it all depends on the insurance contracts.

Generally, liability insurance is included in casualty insurance. This is usually essential where there is damage, and the person or company is not able to meet the payment responsibility. Apart from damage, casualty insurance may also cover the following:

  • Death
  • Injury
  • Theft

References for Commercial Property Casualty Market Index Survey

http://www.businessdictionary.com/definition/Commercial-Property-Casualty-Market-Index-Survey.html

https://www.investopedia.com/terms/c/commercial-property-survey.asp

https://thelawdictionary.org/commercial-propertycasualty-market-index-survey/

Academic Research on Commercial Property Casualty Market Index Survey

Market efficiency and the cost of capital: the strange case of fire and casualty insurance companies, Quirin, G. D., & Waters, W. R. (1975). The Journal of Finance, 30(2), 427-445. In this paper, the authors discuss the cost of capital and the market efficiency in the context of fire and casualty insurance companies case. The authors regard it a strange case. Such companies are basically the financial intermediaries that use funds to invest in the securities. Funds may be their own as well as the ones that the customers advance them. These insurance companies pay by relieving the customer from risks. The authors design a model that takes into consideration the joint asset-liability portfolio of an insurance company and then, makes a comparison of risk expected return options to this company and other participants of the capital market.

The consequences of labor market flexibility: Panel evidence based on survey data, Di Tella, R., & MacCulloch, R. (2005). European Economic Review, 49(5), 1225-1259. The authors present a new data set on the restrictions of hiring and firing for twenty-one OECD (Organisation for Economic Co-operation and Development) member countries for 1984 to 1990. The data has been collected on the basis of a survey of businessmen in these countries. The results show that increasing the labour market flexibility enhances the rate of employment and participation in the labour force. If France would make flexible labour markets like the United States, the rate of employment would move up to 1.6 percentage points. Also, the inflexible labour markets generate jobless recoveries. Hence, unemployment persists.

Law and the determinants of property‐casualty insurance, Esho, N., Kirievsky, A., Ward, D., & Zurbruegg, R. (2004). Journal of risk and Insurance, 71(2), 265-283. This paper evaluates the significance of legal enforcement and rights in affecting PCI consumption (Property Casualty Insurance). The authors focus on estimating insurance density around the countries. They also analyze the price, loss probability and risk aversion measure. With the help of a panel data set, they apply a generalized technique of moments dynamic system estimator. The findings are that property rights protection and insurance consumption have a robust positive relationship. This relationship is robust to different model specs and estimation techniques. Also, PCI purchase is positively and significantly linked to income and loss probability.

Discretionary and non-discretionary revisions of loss reserves by property-casualty insurers: Differential implications for future profitability, risk and market value, Petroni, K. R., Ryan, S. G., & Wahlen, J. M. (2000). Review of Accounting Studies, 5(2), 95-125.  The authors develop and evaluate a specific model of the PC industry that uses proxies for discretion and non-discretion to divide loss reserve revisions into the components of discretion and non-discretion. This enables them to check the directional Hypothesis about the relationship in revision components and market value, risk and profitability. The findings are that discretionary revisions have a negative relation to future profitability, positive relation to firm risk and negative relation to Market to Boot Ratios. The non-discretionary revisions have a positive relation to risk and future profitability, but no relation to Market to Boot Ratios.

Should the government provide insurance for catastrophes, Cummins, J. D. (2006). Federal Reserve Bank of St. Louis Review, 88(4), 337-379. This article evaluates that the government should or should not play a role in providing insurance for man-made and natural catastrophes in the US. Though Hurricane Katrina like natural catastrophes stressed the insurance markets, government role should be lessened to prevent crowding out more effective private market solutions, e.g. catastrophe bonds. Rather the government should help the private market evolve by overcoming regulatory barriers. The NFIP (National Flood Insurance Program) could not cover many property owners, hit by floods. It needs to be revised or it should be replaced by private market substitutes, for example, federal ‘make available’ requirements.

How Does the Corporate World Cope with Mega‐Terrorism? Puzzling Evidence from Terrorism Insurance Markets, MichelKerjan, E., & Pedell, B. (2006). Journal of Applied Corporate Finance, 18(4), 61-75. This paper evaluates the role of insurance in providing financial protection to commercial enterprises against the economic effects of big terrorist attacks. The authors explain the main features of terrorism insurance programs in the US (TRIA), the UK (Pool are) and Germany (Extremus). Next, the authors make a detailed analysis of the increase in rates and prices, especially in financial institutions. A better implementation of these programs and of present growth of terrorism insurance markets in the United States and Europe will help decision makers in providing more efficient protection against the economic effects of mega-terrorism.

Alternative models for estimating the cost of equity capital for property/casualty insurers, Lee, A., & Cummins, J. (1998). Review of Quantitative Finance and Accounting, 10(3), 235-267. This article calculates the equity capital cost for property or casualty insurers by implementing 3 different asset pricing models; CAPM (Capital Asset Pricing Model), APT (Arbitrage Pricing Theory) and a combined CAPM/APT model. The authors evaluate the in-sample forecast ability by using the Mean Squared Error (MSE) Model, the Granger & Newbold conditional efficiency evaluation and the Theil U2 Statistic. On the basis of forecast evaluation procedures, the combined CAPM/APT model and APT model produce better results than the CAPM in calculating the equity capital cost for the PC insurers while the combined forecast can surpass the individual forecasts.

The risk effects of combining banking, securities, and insurance activities, Allen, L., & Jagtiani, J. (2000). Journal of Economics and Business, 52(6), 485-497. The authors assess the effect of insurance activities and securities on the risk of banking firms. The non-bank activities minimize the overall risk but raise the systematic market risk. The risk’s unit price does not consist of a risk premium to price the increased systematic risk. The findings are that in the case of net profits to universal banking, potential benefits from demand effects and synergies should be sufficiently strong to overcome the demerits of increased systematic risk. The authors suggest that diversification gains are not big enough to justify increasing bank powers into insurance underwriting activities and non-bank securities.

Applying simulation optimization to the asset allocation of a property–casualty insurer, Yu, T. Y., Tsai, C., & Huang, H. T. (2010). European Journal of Operational Research, 207(1), 499-507. To be solvent and competitive, the property-casualty insurers need to allocate assets properly. This paper combines simulation models with a new evolutionary algorithm to solve the multi-period asset allocation issue of a property-casualty insurer. First, the authors develop a simulation model for simulating the property-casualty insurer’s operations. Then, they devise MPES (Multi-Phase Evolution Strategies) to apply with the simulation model and find the promising allocation of the asset for the insurer. The findings are that MPES is an efficient search algorithm. It is more important than the grid search method. The reallocation strategy outperforms rebalancing policies significantly.

The economic effects of violent conflict: Evidence from asset market reactions, Guidolin, M., & La Ferrara, E. (2010). Journal of Peace Research, 47(6), 671-684. This paper elaborates the impacts of conflict onset on the markets of the asset using the event study technique. The authors collect a sample of one hundred and one inter-state and internal conflicts during 1974 to 2004 and observe that their sizeable fraction significantly affects the exchange rates, commodity prices, stock market indices and oil prices. The findings are that national stock markets, on average, show positive reactions to conflict onset. In the Middle East and Asia, conflicts have the strongest impact. The robust results show the economic significance of the impacts of conflicts on the asset market.

Determinants of service quality and satisfaction in the auto casualty claims process, Royne Stafford, M., Stafford, T. F., & Wells, B. P. (1998). Journal of Services Marketing, 12(6), 426-440. The insurance industry lays stress on customer satisfaction and service quality because companies try to compete with normally undifferentiated products. It shows that the insurers understand, on the basis of which elements, the customers assess the performance of their providers. This paper evaluates the most important dimensions of customer satisfaction and service quality across 4 big companies in the auto casualty sector, with the help of a known instrument ‘SERVQUAL’. The findings are that reliability is, consistently, the most vital determinant of both these elements. Finally, the authors discuss the implications for auto insurance companies.

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