We employ a panel data research design to examine the determinants of investment returns in the Swedish property fire insurance industry from 1903 to 1939 – a period of great economic and political uncertainty. Contrary to expectations, we find that mutual fire insurers generated systematically higher investment returns than stock fire insurers. Investment returns are inversely related to leverage but positively related to liquidity, showing that firms adopting a more precautionary investment strategy attain higher returns.

We analyze fire exposure rating for three types of risk profiles: policy profiles, top location profiles and location profiles. Location profiles offer more detailed information than top location profiles, which in turn are better than policy profiles. We prove criteria to ensure that a better quality of risk profile leads to a lower price. These criteria are discussed with respect to standard exposure rating and an alternative method called ‘burning cost-adjusted exposure rating’, where the loss ratio is adjusted by means of the burning cost of a low reference layer. Further, we introduce a family of analytic exposure curves, the so-called EP exposure curves. These curves are useful for practical application, since the criteria given in this paper can be checked easily for exposure curves that can be approximated by EP exposure curves. This is of particular interest for discrete exposure curves. Finally, we apply the results to the MBBEFD exposure curves.

Some reasons are given for paying special attention to the gross cost of catastrophe claims in planning and control. A method is then described of defining catastrophe claims and estimating their expected cost. The various steps in applying the method to real data and its performance for planning and control are discussed and illustrated in conjunction with an investigation carried out on a company portfolio.