The Capitalization of Insurance Premiums in House Prices. Issue 4 (15th March 2014)

• Record Type: Journal Article
• Authors: Nyce, Charles; Dumm, Randy E.; Sirmans, G. Stacy; Smersh, Greg
• Is Part Of: Journal of risk and insurance. Volume 82:Issue 4(2015)
• Page Start: 891
• Page End: 919
• Publication Date: 2014-03-15
• Subjects: Insurance -- United States -- Periodicals; 368.97305
• DOI: 10.1111/jori.12041
• Languages: English
• ISSNs: 0022-4367

Abstract

Abstract: This study uses Miami‐Dade County, Florida home sales, and Citizens Property Insurance Corporation data for the period 2004 through 2009 to measure the capitalization effect of increases in premiums on house prices. Using hedonic pricing models, spatial autocorrelation models, and difference‐in‐differences models, we find that new information was conveyed to homeowners in the higher risk areas by the 2004/2005 storms and that consumers appear to use the insurance premium as a "risk signal." We also find some support for the hypothesis that the risk of potential hurricane losses is communicated to potential homebuyers through windzone maps.