Catastrophic Losses and Insurer Profitability: Evidence From 9/11 |
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| Authors: | Xuanjuan Chen, Helen Doerpinghaus&dagger , Bing-Xuan Lin&Dagger , Tong Yu§ |
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| Affiliation: | Xuanjuan Chen is at the College of Business Administration, Kansas State University;. Helen Doerpinghaus is at the Moore School of Business, University of South Carolina;. Bing-Xuan Lin is at the College of Business Administration, University of Rhode Island and Zhongnan University of Economics and Law;. Tong Yu is at the College of Business Administration, University of Rhode Island. |
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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. |
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