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Consolidation of the US property and casualty insurance industry: Is climate risk a causal factor for mergers and acquisitions?

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  • Dionne, Georges

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Fenou, Akouété

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Mnasri, Mohamed

    (HEC Montreal, Canada Research Chair in Risk Management)

Abstract

This report analyzes the difference between mergers and acquisitions (M&As) of target insurers in the US life and non-life insurance sectors. We first document M&A transactions in the US insurance market between 1990 and 2021 and select the M&A transactions related to US target insurers. We then study the evolution of the life and non-life insurance sectors over time in order to determine whether there are parallel trends between the evolution of M&As of target insurers in these two sectors over time. We empirically test the difference between the M&As of the life and non-life insurance sectors by employing a natural experiment method and verify whether climate risk has been a causal factor in the observed difference in mergers and acquisitions between the two sectors after 2012. Our results do not support a causal link between climate risk and M&As during the period of analysis. Insurers choose other diversification sources of capital, including reinsurance, premium management, CAT bonds, and better capital management under stronger risk regulation.

Suggested Citation

  • Dionne, Georges & Fenou, Akouété & Mnasri, Mohamed, 2023. "Consolidation of the US property and casualty insurance industry: Is climate risk a causal factor for mergers and acquisitions?," Working Papers 23-1, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2023_001
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    References listed on IDEAS

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    More about this item

    Keywords

    Mergers and acquisition; US insurance industry; property and casualty insurance; life insurance; health insurance; climate risk; capital management; reinsurance; ILS; CAT bonds; premium management; risk regulation;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G52 - Financial Economics - - Household Finance - - - Insurance
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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