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Exploring the Impact of Natural Disasters on U.S. Insurance Companies: An Empirical Analysis

Title:

Exploring the Impact of Natural Disasters on U.S. Insurance Companies: An Empirical Analysis

Sadati, Akram Sadat (2024) Exploring the Impact of Natural Disasters on U.S. Insurance Companies: An Empirical Analysis. Masters thesis, Concordia University.

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Abstract

In this study, we investigate the impact of natural disasters on the stock prices of U.S.
insurance companies from 2010 to 2022. Using a sample of hurricanes, wildfires, and
tornadoes, we conduct an event study to analyze the market reactions to these events and
examine why some insurance firms are more affected than others. Our findings indicate that
natural disasters tend to result in negative abnormal returns for insurance firms, with stock
prices dropping significantly around the events. Yet, the price declines are followed by a brief
recovery period after the disaster has ended. The study highlights key factors affecting
insurers’ market performance during such events: firms with higher leverage, lower net
income, and a lower market valuation perform worse than their respective counterparts.
Additionally, we find that disasters with large insured damage amounts as well as hurricanes
invoke larger negative market reactions. Furthermore, we observe that natural disasters have
a significant impact on an insurer’s accounting performance. Specifically, disasters cause a
significant decline in an insurer’s Return on Assets (ROA), with variations based on the
insured damages stemming from a disaster and the insurer’s ex-ante financial performance.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Sadati, Akram Sadat
Institution:Concordia University
Degree Name:M. Sc.
Program:Finance
Date:6 August 2024
Thesis Supervisor(s):Walker, Thomas
Keywords:Natural disasters, Insurance companies, Cumulative abnormal returns (CAR)s, Event Study, Market reactions
ID Code:994388
Deposited By: Akram Sadat Sadati
Deposited On:24 Oct 2024 17:28
Last Modified:24 Oct 2024 17:28

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