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

Author

Listed:
  • Yugang Ding

    (Guangdong University of Foreign Studies
    Guangdong University of Foreign Studies)

  • Peiyun Deng

    (Shanghai International Studies University)

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.

Suggested Citation

  • Yugang Ding & Peiyun Deng, 2024. "Learning from natural disasters: Evidence from enterprise property insurance take-up in China," Journal of Risk and Uncertainty, Springer, vol. 68(3), pages 299-334, June.
    • Handle: RePEc:kap:jrisku:v:68:y:2024:i:3:d:10.1007_s11166-024-09428-4
    DOI: 10.1007/s11166-024-09428-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Enterprise property insurance; Natural disasters; Risk beliefs; Learning effects;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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