Property-Liability Insurers Recapitalization: An Event Study

Abstract

This paper utilizes an event study methodology and presents an empirical investigation of property-liability (P&L) insurers’ recapitalization behavior after the industry-wide capital shock, September 11 attacks. The Probit regression results provide the evidence that external capital markets are more likely to be accessed by property-liability insurers which are larger in size, have greater need to replenish capital stocks, have greater growth opportunities, higher cash flow volatilities, greater coverage, or those who already used financial debt. Poor financial quality insurers appear to be constrained.