NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Paul Raschky

Department of Economics
Monash University
Australia

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NBER Working Papers and Publications

October 2013Corporate Demand for Insurance: New Evidence from the U.S. Terrorism and Property Markets
with Erwann Michel-Kerjan, Howard Kunreuther: w19532
Since the passage of the Terrorism Risk Insurance Act of 2002, corporate terrorism insurance is sold as a separate policy from commercial property coverage. In this paper, we determine whether companies differ in their demand for property and terrorism insurance. Using a unique dataset of insurance policies purchased by large U.S. firms, combined with financial information of the corporate clients and of the insurance provider, we apply a two-stage least squares (2SLS) approach to obtain consistent estimates of premium elasticity of corporate demand for property and terrorism coverage. Our findings suggest that both are rather price inelastic and that corporate demand for terrorism insurance is significantly more price inelastic than demand for property insurance. We further find a negativ...

Published: Erwann Michel-Kerjan & Paul Raschky & Howard Kunreuther, 2015. "Corporate Demand for Insurance: New Evidence From the U.S. Terrorism and Property Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 82(3), pages 505-530, 09. citation courtesy of

September 2011Corporate Demand for Insurance: An Empirical Analysis of the U.S. Market for Catastrophe and Non-Catastrophe Risks
with Erwann Michel-Kerjan, Howard Kunreuther: w17403
Using a unique dataset of insurance decisions by over 1,800 large U.S. corporations, this study provides the first empirical analysis of firm behavior that compares corporate demand for property and catastrophe insurance (here, terrorism). We combine demand and supply data and apply a simultaneous-equation approach to address the problem of endogenous premium decisions. The main finding is that demand for property and catastrophe insurance are not very different and that the demand for catastrophe coverage is actually more price inelastic. We also show that a corporation's ability to self-insure affects the demand for catastrophe insurance but not for property insurance.
 
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