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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12348.
Date of creation: Jul 2006
Date of revision:
Publication status: published as 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.
Note: HC LE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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.:
- Martin F. Grace & Robert W. Klein & Paul R. Kleindorfer, 2004. "Homeowners Insurance With Bundled Catastrophe Coverage," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(3), pages 351-379.
- Born, Patricia H, 2001. "Insurer Profitability in Different Regulatory and Legal Environments," Journal of Regulatory Economics, Springer, vol. 19(3), pages 211-37, July.
- Richard Zeckhauser, 1995. "Insurance and catastrophes," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 20(2), pages 157-175, December.
- Christian Gollier, 1997. "About the Insurability of Catastrophic Risks*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 22(2), pages 177-186, April.
- Viscusi, W Kip, 1993. " The Risky Business of Insurance Pricing," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 117-39, August.
- Patricia Born & William M. Gentry & W. Kip Viscusi & Richard J. Zeckhauser, 1995.
"Organizational Form and Insurance Company Performance: Stocks versus Mutuals,"
NBER Working Papers
5246, National Bureau of Economic Research, Inc.
- Patricia Born & William M. Gentry & W. Kip Viscusi & Richard J. Zeckhauser, 1998. "Organizational Form and Insurance Company Performance: Stocks versus Mutuals," NBER Chapters, in: The Economics of Property-Casualty Insurance, pages 167-192 National Bureau of Economic Research, Inc.
- Darrell Duffie & Bruno Strulovici, 2011.
"Capital Mobility and Asset Pricing,"
NBER Working Papers
17296, National Bureau of Economic Research, Inc.
- Darrell Duffie & Bruno Strulovici, 2009. "Capital Mobility and Asset Pricing," Discussion Papers 1478, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bruno Strulovici & Darrell Duffie, 2009. "Capital Mobility and Asset Pricing," 2009 Meeting Papers 87, Society for Economic Dynamics.
- 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.
- Viscusi, W. Kip & Zeckhauser, Richard J., 2006. "National Survey Evidence on Disasters and Relief: Risk Beliefs, Self-Interest, and Compassion," Working paper 435, Regulation2point0.
- 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.
- Kevin S. Markle & Douglas A. Shackelford, 2011. "Cross-Country Comparisons of Corporate Income Taxes," NBER Working Papers 16839, National Bureau of Economic Research, Inc.
- Abdel-Raheem F. Fares & Eid Ahmad Abou-Bakr, 2012. "Economics of Insurance against Natural Catastrophes: Over-Burdened Arab Insurers," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 95-105, August.
- Antonio Coviello & Giovanni Di Trapani, 2013. "Supply Risk Management: Mitigation Strategy," The International Journal of Economic Behavior - IJEB, Faculty of Business and Administration, University of Bucharest, vol. 3(1), pages 169-176, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.