Cyclicality or volatility? The satellite insurance market

The history of the satellite insurance market indicates that this market experiences crises and booms in profitability and prices that repeat in a manner suggestive of cycles. The purpose of this article is to rigorously investigate cyclicality of these and other features of the satellite insurance market and assess their volatility formally. Using data from 1968 to 2008, volatility and cyclicality are analyzed for satellite insurance market capacity, rates, and underwriting results, among other measures. The coefficient of variation for the various satellite insurance market metrics is used to assess volatility. Standard underwriting analysis is used to determine whether a cycle exists for various insurance metrics. The results indicate that some aspects of the satellite insurance market are volatile (e.g. claims) or cyclical (e.g. rates), while capacity is both volatile and cyclical.