Catastrophic Risk and Credit Markets

We provide a model of the effects of catastrophic risk on real estate financing and prices and demonstrate that insurance market imperfections can restrict the supply of credit for catastrophe- susceptible properties. Using unique micro-level data, we find that earthquake risk decreased commercial real estate bank loan provision by 22% in California properties in the 1990s. The effects are more severe in African-American neighborhoods. We show that the 1994 Northridge earthquake had only a short-term disruptive effect. Our basic findings are confirmed for hurricane risk, and our model and empirical work have implications for terrorism and political perils.

UCLA Anderson School and Graduate School of Business, University of Chicago and NBER
Length of Resource
Resource File
Mark J. Garmaiseand Tobias J. Moskowitz
Date Published
Publication Type
Resource Type

ResourceID: 72513

< Return to Library