Catastrophic Losses and Insurer Profitability: Evidence from 9/11

24 Pages Posted: 10 Mar 2008

See all articles by Xuanjuan Chen

Xuanjuan Chen

Shanghai University of Finance and Economics

Helen I. Doerpinghaus

University of South Carolina - Darla Moore School of Business

Bing-Xuan Lin

University of Rhode Island

Tong Yu

University of Cincinnati - Department of Finance - Real Estate

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Abstract

We examine the effects of 9/11 on the insurance industry, hypothesizing a short-run claim effect, resulting from insufficient premium ex ante for catastrophic losses, and a long-run growth effect, resulting from ex post insurance supply reductions and risk updating. Following Yoon and Starks (1995) we use short- and long-run abnormal forecast revisions to measure both effects, analyzing them as a function of firm-specific characteristics. We find that firm type, loss estimates, reinsurance use, and tax position are important determinants of the short-run position. Firm type, loss estimates, financial strength, underwriting risk, and reinsurance are key determinants of the firm's long-run position.

Suggested Citation

Chen, Xuanjuan and Doerpinghaus, Helen I. and Lin, Bing-Xuan and Yu, Tong, Catastrophic Losses and Insurer Profitability: Evidence from 9/11. Journal of Risk & Insurance, Vol. 75, Issue 1, pp. 39-62, March 2008, Available at SSRN: https://ssrn.com/abstract=1103698 or http://dx.doi.org/10.1111/j.1539-6975.2007.00247.x

Xuanjuan Chen (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Helen I. Doerpinghaus

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

Bing-Xuan Lin

University of Rhode Island ( email )

7 Lippitt Rd
Kingston, RI 02881
United States
401-874-4895 (Phone)
401-874-4312 (Fax)

Tong Yu

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States
4019548606 (Phone)
4019548606 (Fax)

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