An Examination of Insurance Stock Prices Following the 1989 Loma Prieta Earthquake

Thomas Aiuppa, Robert J. Carney and Thomas M. Krueger

Journal of Insurance Issues, 1993, vol. 16, issue 1, 1-15

Abstract: This paper examines the reaction of insurance stock prices to the 1 989 Loma Prieta earthquake. Three theories about the perceived future operating performance of insurance companies following the earthquake are tested: (1) substantial cash outflows due to the claims, (2) abandonment of soft-market pricing, and (3) additional net cash inflows as a result of increased earthquake insurance premiums. The analysis employs a two-index market model to control for industry clustering. The findings indicate that market perceived that the effect of the earthquake would be additional earnings for earthquake insurers.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:wri:journl:v:16:y:1993:i:1:p:1-15

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