Reflexivity in Competition-Originated Underwriting Cycles

This article addresses the fundamental observation that aggressive newcom‐ ers seeking greater market share trigger the industry response of reducing rates that may gradually fall below marginal cost. In this study, the concept of reflexivity as connection between the participants’ thinking and the situation in which they participate is applied. This article suggests applying as an insurance regulation technique, while the competition‐originated cycle is in its early stage, the triplets of year‐end market share, profit, and solvency indicators. It emphasizes the need for applying all these characteristics together, rather than the first two.