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An Examination of Insurance Stock Prices Following the 1989 Loma Prieta Earthquake


  • Thomas Aiuppa
  • Robert J. Carney
  • Thomas M. Krueger


This paper examines the reaction of insurance stock prices to the 1 989 Loma Prieta earthquake. Three theories about the perceived future operating performance of insurance companies following the earthquake are tested: (1) substantial cash outflows due to the claims, (2) abandonment of soft-market pricing, and (3) additional net cash inflows as a result of increased earthquake insurance premiums. The analysis employs a two-index market model to control for industry clustering. The findings indicate that market perceived that the effect of the earthquake would be additional earnings for earthquake insurers.

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  • Thomas Aiuppa & Robert J. Carney & Thomas M. Krueger, 1993. "An Examination of Insurance Stock Prices Following the 1989 Loma Prieta Earthquake," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 16(1), pages 1-15.
  • Handle: RePEc:wri:journl:v:16:y:1993:i:1:p:1-15

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    2. repec:eee:riibaf:v:41:y:2017:i:c:p:556-576 is not listed on IDEAS
    3. Kleidt Benjamin & Schiereck Dirk & Sigl-Grueb Christof, 2009. "Rationality at the Eve of Destruction: Insurance Stocks and Huge Catastrophic Events," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(2), pages 1-27, April.
    4. Oskar Kowalewksi & Piotr Spiewanowski, 2017. "Stock market response to potash mine disasters," Working Papers 2017-ACF-02, IESEG School of Management.
    5. Benjamin M. Blau & Robert A. Van Ness & Chip Wade, 2008. "Capitalizing on Catastrophe: Short Selling Insurance Stocks Around Hurricanes Katrina and Rita," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(4), pages 967-996.
    6. Atsushi Takao & Takuya Yoshizawa & Shuofen Hsu & Takashi Yamasaki, 2011. "The Effect of the Great East Japan Earthquake on the Stock Prices of Non-Life Insurance Companies," Discussion Papers 2011-46, Kobe University, Graduate School of Business Administration.
    7. repec:bla:jrinsu:v:83:y:2016:i:4:p:849-876 is not listed on IDEAS

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