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Insurance as a Double-Edged Sword: Quantitative Evidence from the 2011 Christchurch Earthquake

Porntida Poontirakul, Charlotte Brown, Erica Seville, John Vargo and Ilan Noy ()
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Porntida Poontirakul: Assumption University
Charlotte Brown: Resilient Organisations
Erica Seville: Resilient Organisations
John Vargo: Resilient Organisations

The Geneva Papers on Risk and Insurance - Issues and Practice, 2017, vol. 42, issue 4, No 4, 609-632

Abstract: Abstract We examine the role of business interruption (BI) insurance in business recovery following the Christchurch earthquake in 2011. First, we ask whether BI insurance increases the likelihood of business survival in the immediate (3–6 months) aftermath of a disaster. We find positive but statistically insignificant evidence that those firms that had incurred damage, but were covered by BI insurance, had higher likelihood of survival post-quake compared with those firms that did not have any insurance. For the medium-term (2–3 years) survival of firms, our results show a more explicit role for insurance. Firms with BI insurance experience increased productivity and improved performance following a catastrophe. Furthermore, we find that those organisations that receive prompt and full payments of their claims have a better recovery than those that had protracted or inadequate claims payments, but this difference between the two groups is not statistically significant. We find no statistically significant evidence that the latter group (inadequate payment) did any better than those organisations that had damage but no insurance coverage. In general, our analysis indicates the importance not only of adequate insurance coverage, but also of an insurance system that delivers prompt claim payments.

Keywords: business interruption; Christchurch; time; recovery (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1057/s41288-017-0067-y

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Handle: RePEc:pal:gpprii:v:42:y:2017:i:4:d:10.1057_s41288-017-0067-y