The Effect of Inflation on Losses and Premiums for Property-Liability Insurers

I have found the paper well written, technically sound, and very logical. On the other hand, the various conclusions appear to be at variance with what is commonly accepted as truth in the property and casualty insurance industry. The reader is le f t with a strong impression that inf lat ion exerts a benign, i f not actually be-neficial effect on the industry. The usual approach in such a controversial case is for the reviewer to state that the model is too simplistic and proceed to com-plicate i t to the nth degree so that no conclusion could ever be drawn. This re-viewer does not l ike complicated models, consequently, he wil l refrain from using this approach. Upon a close analysis, i t is obvious that most of the unusual conclusions depend on the appl icabi l i ty of the "Fisher effect " to real l i fe. I t may, therefore, be useful to concentrate on this subject. As far as I know, Stephen D'Arcy was the f i r s t to introduce the "Fisher effect" to the Casualty Actuarial Society. This happened in the May 1979 Call Paper Program. Irving Fisher was a classical economist who in 1896 presented the theory that in