Interest rates are among the many variables in an actuary’s calculations. They are used when calculating an insurer’s technical provisions, and they are the force behind turning idle money into pure profit. Yet despite their power over an insurer’s competitive strategy, interest rates are victim to the whims of markets and central banks. Noting the role of interest in many facets of insurance, an actuary is left to wonder whether interest rates have the capacity to predict the performance of the property/casualty insurance industry.
This paper will look to find whether such predictive capabilities exist. It will analyze this relationship by examining the effects of interest rates on various property/casualty industry-aggregate accounting values, profitability measures, and lines of business.
