Corporate Demand for Insurance: an Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks

34 Pages Posted: 21 Sep 2011 Last revised: 29 Sep 2011

See all articles by Erwann Michel-Kerjan

Erwann Michel-Kerjan

University of Pennsylvania - The Wharton School - Center for Risk Management

Paul Raschky

Monash University - Department of Economics

Howard Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department; National Bureau of Economic Research (NBER)

Date Written: September 2011

Abstract

Using a unique dataset of insurance decisions by over 1,800 large U.S. corporations, this study provides the first empirical analysis of firm behavior that compares corporate demand for property and catastrophe insurance (here, terrorism). We combine demand and supply data and apply a simultaneous-equation approach to address the problem of endogenous premium decisions. The main finding is that demand for property and catastrophe insurance are not very different and that the demand for catastrophe coverage is actually more price inelastic. We also show that a corporation's ability to self-insure affects the demand for catastrophe insurance but not for property insurance.

Suggested Citation

Michel-Kerjan, Erwann and Raschky, Paul and Kunreuther, Howard C., Corporate Demand for Insurance: an Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks (September 2011). NBER Working Paper No. w17403. Available at SSRN: https://ssrn.com/abstract=1931174

Erwann Michel-Kerjan (Contact Author)

University of Pennsylvania - The Wharton School - Center for Risk Management ( email )

Jon M Huntsman Hall, Suite 500
3730 Walnut Street
Philadelphia, PA 19104-6365
United States

Paul Raschky

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

Howard C. Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department ( email )

3730 Walnut Street
558 & 559 Jon M. Huntsman Hall
Philadelphia, PA 19104-5340
United States
212-854-0423 (Phone)
215-573-2130 (Fax)

National Bureau of Economic Research (NBER)

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