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Title: An Event Study Examination of the Effect of Natural Catastrophe on United States Property and Casualty Insurance Companies
Authors: Shuster, David J. Jr
Advisors: Jurek, Jakub
Department: Economics
Class Year: 2013
Abstract: In the United States, property and casualty insurance companies bear a great deal of risk against the likelihood of catastrophic events. While rare, these events often amount to more than $1 billion of insurance losses in a single day. As these events are inherently difficult to predict with any sort of accuracy, they come as a definite shock to the market. In this thesis, I utilize three different empirical methodologies in order to determine the effect these catastrophes have on publically traded property and casualty insurance companies. The first methodological framework focuses on the long term effects of these events while the second focuses on the short term. The third and final methodology seeks to identify a relationship between the magnitude of these events and the magnitude of the market’s response. The results of these analyses suggest that catastrophic events have a negative effect in the short term, but a positive effect in the long term. These conclusions are consistent with those suggested by Angbazo and Narayanan in their 1996 study of Hurricane Andrew. However, I was not able to uncover any significant relationship between magnitude of insurance loss and magnitude of market reaction. Nevertheless, this thesis marks the first time these effects have been studied using an aggregated event set.
Extent: 90 pages
Access Restrictions: Walk-in Access. This thesis can only be viewed on computer terminals at the Mudd Manuscript Library.
Type of Material: Princeton University Senior Theses
Language: en_US
Appears in Collections:Economics, 1927-2016

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