Title: Market responses to loss shocks and insurers' post-catastrophe performance in the US property-casualty insurance market
Authors: Ning Wang; Yiling Deng
Addresses: Department of Economics and Finance, Langdale College of Business Administration, Valdosta State University, 1500 N. Patterson St., Valdosta, GA 31698, USA ' Department of Risk Management and Insurance, Robinson College of Business, Georgia State University, 35 Broad Street, Atlanta, GA 30303, USA
Abstract: We employ impulse response analyses to study aggregated time series data of the US property-casualty insurance market. We find that insurance price is more sensitive towards loss shocks than total premiums. Our results at the industry level support capacity constraint theory that loss shocks significantly increase insurance price and reduce insurance coverage quantity. The data at the firm level is also examined. We find a positive relationship between insurers' post-catastrophe performance and capital capacity while their post-catastrophe performance is ambiguously associated with financial quality and losses. Our findings suggest that the capital recovery after catastrophes in the insurance market is intelligible and some ordered.
Keywords: insurance market; property-casualty insurance companies; loss shocks; catastrophes; USA; United States; market responses; insurer performance; insurance price; insurance coverage; capital capacity; financial quality; capital recovery.
DOI: 10.1504/IJEBR.2016.076163
International Journal of Economics and Business Research, 2016 Vol.11 No.3, pp.231 - 246
Received: 28 Oct 2015
Accepted: 30 Nov 2015
Published online: 27 Apr 2016 *