The Catastrophic Effects of Natural Disasters on Insurance Markets
AbstractNatural catastrophes often have catastrophic risks on insurance companies as well as on the insured. Using a very large dataset on homeowners%u2019 insurance coverage by state, by firm, and by year for the 1984 to 2004 period, this paper documents the positive effect on losses and loss ratios of both unexpected catastrophes as well as large events that the authors term %u201Cblockbuster catastrophes.%u201D Insurers adapt to these catastrophic risks by raising insurance rates, leading to lower loss ratios after the catastrophic event. There is a widespread event of unexpected catastrophes and blockbuster catastrophes that reduces total premiums earned in the state, reduces the total number writing insurance coverage in the state, and leads to the exit of firms from the state. Firms with low levels of homeowners%u2019 premiums are most adversely affected by the catastrophes.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12348.
Date of creation: Jul 2006
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Other versions of this item:
- Patricia Born & W. Viscusi, 2006. "The catastrophic effects of natural disasters on insurance markets," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 55-72, September.
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
This paper has been announced in the following NEP Reports:
- NEP-AGR-2006-07-09 (Agricultural Economics)
- NEP-ALL-2006-07-09 (All new papers)
- NEP-ENE-2006-07-09 (Energy Economics)
- NEP-FIN-2006-07-09 (Finance)
- NEP-FMK-2006-07-09 (Financial Markets)
- NEP-IAS-2006-07-09 (Insurance Economics)
- NEP-LAW-2006-07-09 (Law & Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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NBER Working Papers
5246, National Bureau of Economic Research, Inc.
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"National Survey Evidence on Disasters and Relief: Risk Beliefs, Self-Interest, and Compassion,"
- W. Viscusi & Richard Zeckhauser, 2006. "National survey evidence on disasters and relief: Risk beliefs, self-interest, and compassion," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 13-36, September.
- W. Kip Viscusi & Richard J. Zeckhauser, 2006. "National Survey Evidence on Disasters and Relief: Risk Beliefs, Self-Interest, and Compassion," NBER Working Papers 12582, National Bureau of Economic Research, Inc.
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