Is it true that insurers benefit from a catastrophic event? Market reactions to the 1995 Hanshin-Awaji earthquake
AbstractPrevious studies, investigating how the market in general viewed the impact of a big earthquake (e.g., the 1989 Loma Prieta earthquake in the San Francisco Bay Area) on insurance firm values, found a positive reaction of insurers' stock prices. This "gaining from loss" may be caused by the subsequent increased demand for insurance coverage. This paper investigates the impact of the 1995 Hanshin-Awaji earthquake on Japanese insurers' value. Contrary to the results for U.S. earthquakes, we find significant negative stock price reactions. Furthermore, our results demonstrate that Japanese stock markets are considerably efficient in assessing the new information generated by the Hanshin-Awaji earthquake. Finally, we also find a negative relationship between stock price reaction and the extent to which an insurer wrote earthquake coverage in the damaged area.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 99-04.
Date of creation: 1999
Date of revision:
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Other versions of this item:
- Yamori, N. & Kobayashi, T., 1999. "Is It True that Insurers Benefit from a Catastrophic Event? Market Reactions to the 1995 Hanshin-Awaji Earthquake," Papers pb99-04, Economisch Institut voor het Midden en Kleinbedrijf-.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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