This article reinvestigates the presence and the causes of the underwriting cycle in the French property–liability insurance industry as displayed by the combined ratio for the 1963–2008 period. The question is still a timely issue if we refer to regulation issues and the recent proposals in the Solvency framework to take into account the fluctuations of the profitability in specifying the solvency capital requirement. In the literature, two approaches are traditionally adopted to investigate the underwriting cycle. The first one refers to an endogenous characterization of the cyclical properties from an AR(2) model. The second one claims that the cycle in the property–liability insurance has exogenous sources related to the financial markets and the general economy. In this article, we reconcile the two approaches by using a smooth transition regression model. This model shows that the AR(2) model is relevant in a first regime where the capacity constraint is binding. In contrast, the fluctuations in the combined ratio are positively influenced by the lagged stock market return in a second regime where the capacity is not constrained, as for the most recent period. Moreover, we find that the current capacity is related to the lagged inflation rate in the latter case. These results confirm the idea that the European rules regarding the solvency capital requirement for insurance companies should take into account the state of the economy and the financial markets.