Do Typhoons Cause Turbulence in Property-Liability Insurers’ Stock Prices&quest

Takashi Yamasaki ()
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Takashi Yamasaki: Graduate School of Business Administration, Kobe University, 2-1 Rokkodai-cho, Nada-ku, Kobe, Hyogo 657-8501, Japan.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2016, vol. 41, issue 3, 432-454

Abstract: The aim of this paper is to clarify how natural disasters influence the stock prices of property-liability insurance companies. Examining a series of typhoons that made landfall in Japan, this paper shows that the stock prices of property-liability insurers, on average, increase around typhoon landfalls. However, cross-sectional results indicate that specific insurer or typhoon characteristics can temper the increase. First, a property-liability insurer’s stock price reacts more positively around typhoons of greater scale and more negatively around typhoons with longer intervals from the previous typhoon landfall, with longer times to landfall, or that cause more serious residential damage. Second, a property-liability insurer’s stock price reacts according to its profitability or business structure. In addition, insurers with a larger capital buffer or of greater financial soundness are evaluated relatively higher around typhoon landfall since the deregulation of the insurance industry.

Date: 2016
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