Learning from natural disasters: Evidence from enterprise property insurance take-up in China

Yugang Ding () and Peiyun Deng ()
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Yugang Ding: Guangdong University of Foreign Studies
Peiyun Deng: Shanghai International Studies University

Journal of Risk and Uncertainty, 2024, vol. 68, issue 3, No 4, 299-334

Abstract: Abstract This paper examines the causal impact of natural disasters on property insurance take-up of firms. Using the data of industrial firms in China, we find that a one-standard-deviation increase in typhoon damage leads to a 2.6% increase in the purchase of property insurance the following year. This increase gradually declines and returns to the previous level three years later. Our results demonstrate that this impact is driven not by changes in risk preferences or supply-side variation but by the updated risk beliefs learned from the typhoon experience. Unlike household insurance decisions, the learning effect of firms demonstrates an indirect but positive effect of typhoons on the firm’s insurance decisions from its related firms in the upstream or downstream sectors, but not from competitors.

Keywords: Enterprise property insurance; Natural disasters; Risk beliefs; Learning effects (search for similar items in EconPapers)
JEL-codes: G22 G32 Q54 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11166-024-09428-4

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