The impact of the September 11 Terrorist Attack on the Global Insurance Markets: Evidence from the Japanese Property-Casualty Insurance Industry

We investigate the significant effects of the September 11 attacks on the Japanese stock market, one of the largest markets in the world. Although several studies have examined the impact of the attacks on the domestic U.S. stock market, few studies have analyzed their impact on the foreign insurance industry through globally well-developed reinsurance transactions. Surprisingly, a mid-sized P/C insurance company, TAISEI Fire and Marine Insurance, went bankrupt on November 22, 2001, two months after the events, due to massive reinsurance claims arising from the terrorist attacks. Using traditional event study methodology for both events, the attacks and the failure, we find that the Japanese stock market reacted to risks of the terrorism event through the global reinsurance market at the time of TAISEI’s failure, rather than immediately after the events of September 11.