ARIA 2021 Annual Meeting

Brad Karl, East Carolina University; Patricia Born, Florida State University

In this paper, we examine insurers’ willingness to offer homeowners coverage after catastrophic events, with an emphasis on the role of rate regulation. Using data on insurer operations for the period 2007-2019, we estimate the impact of catastrophic events on post-event supply of coverage and test whether supply is sensitive to the disposition of subsequent requests for rate increases. We identify the insurers in states affected by a natural disaster event file for a rate increase in the year following an event. We compare insurers that do not file for a rate increase to those that do to assess whether requesting a rate change and subsequent approval of rate change requests affect the likelihood that an insurer’s premium volume changes materially, e.g., they significantly increase or decrease their exposure in the state. Our empirical results suggest important policy implications with regard to improving the availability of insurance against catastrophic threats. Concerning the impact of regulatory constraints, we present empirical evidence of how certain regulatory responses may unintentionally impede insurers’ willingness to provide coverage against natural disasters.