Document Type
Article
Publication Title
Journal of Risk and Uncertainty
Publication Date
2006
Page Number
55
Keywords
homeowners insurance, insurance companies, risk, catastrophe, insurance rates, natural disasters
Disciplines
Insurance Law | Law
Abstract
Natural catastrophes often have catastrophic risks on insurance companies as well as on the insured. Using a very large dataset on homeowners insurance coverage by state, by firm, and by year for the 1984 to 2004 period, this paper documents the positive effect on losses and loss ratios of both unexpected catastrophes as well as large events that the authors term "blockbuster catastrophes." Insurers adapt to these catastrophic risks by raising insurance rates, leading to lower loss ratios after the catastrophic event. There is a widespread event of unexpected catastrophes and blockbuster catastrophes that reduces total premiums earned in the state, reduces the total number writing insurance coverage in the state, and leads to the exit of firms from the state. Firms with low levels of homeowners premiums are most adversely affected by the catastrophes.
Recommended Citation
W. Kip Viscusi and Patricia Born,
The Catastrophic Effects of Natural Disasters on Insurance Markets, 33 Journal of Risk and Uncertainty. 55
(2006)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/122