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Impact of hurricanes on US insurance stocks

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  • Frederick Schuh
  • Tanja Jaeckle

Abstract

This paper analyzes the impact of hurricanes on insurance stock returns in the United States. The objective is to assess the reaction of insurance stock prices caused by hurricanes using an extensive data sample consisting of the costliest hurricanes since 2004. We aim to understand the insurance stock price reactions and provide possible explanations for the observed results. The main outcome is a negative abnormal return for all examined time windows. Analyses of impact factors show that high‐category hurricanes have more negative abnormal returns in comparison to low‐category hurricanes. The latter category is even positively correlated with the cumulative abnormal return. The regression model indicates a statistically significant negative correlation between the cumulative abnormal return and the damage caused by the hurricane.

Suggested Citation

  • Frederick Schuh & Tanja Jaeckle, 2023. "Impact of hurricanes on US insurance stocks," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 26(1), pages 5-34, March.
    • Handle: RePEc:bla:rmgtin:v:26:y:2023:i:1:p:5-34
    DOI: 10.1111/rmir.12230
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    References listed on IDEAS

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    1. Congressional Budget Office, 2016. "Potential Increases in Hurricane Damage in the United States: Implications for the Federal Budget," Reports 51518, Congressional Budget Office.
    2. Patricia Born & W. Viscusi, 2006. "The catastrophic effects of natural disasters on insurance markets," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 55-72, September.
    3. Lamb, Reinhold P, 1998. "An Examination of Market Efficiency around Hurricanes," The Financial Review, Eastern Finance Association, vol. 33(1), pages 163-172, February.
    4. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    5. repec:cbo:report:515181 is not listed on IDEAS
    6. Martin F. Grace & Robert W. Klein, 2009. "The Perfect Storm: Hurricanes, Insurance, and Regulation," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 12(1), pages 81-124, March.
    7. Partha Gangopadhyay & Joseph D. Haley & Li Zhang, 2010. "An Examination of Share Price Behavior Surrounding the 2005 Hurricanes Katrina and Rita," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 33(2), pages 132-151.
    8. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    9. repec:cbo:report:515182 is not listed on IDEAS
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    Cited by:

    1. Montero, José-María & Naimy, Viviane & Farraj, Nermeen Abi & El Khoury, Rim, 2024. "Natural disasters, stock price volatility in the property-liability insurance market and sustainability: An unexplored link," Socio-Economic Planning Sciences, Elsevier, vol. 91(C).
    2. Robert Engle & Shan Ge & Hyeyoon Jung & Xuran Zeng, 2023. "Physical Climate Risk Factors and an Application to Measuring Insurers’ Climate Risk Exposure," Staff Reports 1066, Federal Reserve Bank of New York.

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