Do Typhoons Cause Turbulence in Property-Liability Insurers’ Stock Prices?
Kobe University - Graduate School of Business Administration
March 27, 2015
The aim of this paper is to clarify how natural disasters influence the stock prices of property-liability insurance companies. Examining a series of typhoons that made landfall in Japan, this paper shows that the stock prices of property-liability insurers, on average, increase around typhoon landfalls. However, cross-sectional results indicate that specific insurer or typhoon characteristics can temper the increase. First, a property-liability insurer’s stock price reacts more positively around typhoons that have greater precipitation and more negatively around typhoons of greater scale, with longer intervals from the previous typhoon landfall, with longer times to landfall, or that cause more serious residential damage. Second, a property-liability insurer’s stock price reacts according to its profitability or business efficiency. In addition, insurers with a larger capital buffer or of greater financial soundness are evaluated relatively higher around typhoon landfall since the deregulation of the insurance industry.
Number of Pages in PDF File: 35
Keywords: property-liability insurer, stock performance, natural disaster, typhoon, insurance regulation
JEL Classification: G14, G15, G22
Date posted: April 22, 2012 ; Last revised: March 28, 2015
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