Abstract
We employ impulse response analyses to study aggregated time series data of the US property-casualty insurance market. We find that insurance price is more sensitive towards loss shocks than total premiums. Our results at the industry level support capacity constraint theory that loss shocks significantly increase insurance price and reduce insurance coverage quantity. The data at the firm level is also examined. We find a positive relationship between insurers' post-catastrophe performance and capital capacity while their post-catastrophe performance is ambiguously associated with financial quality and losses. Our findings suggest that the capital recovery after catastrophes in the insurance market is intelligible and some ordered.
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