Is it true that insurers benefit from a catastrophic event? Market reactions to the 1995 Hanshin-Awaji earthquake
Previous 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.
|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (415) 974-3184
Fax: (415) 974-2168
Web page: http://www.frbsf.org/economics/pbc/Email:
More information through EDIRC
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:fip:fedfpb:99-04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger)
If references are entirely missing, you can add them using this form.