LLOYDS FINANCIAL DISTRESS AND CONTAGION WITHIN THE US PROPERTY AND LIABILITY INSURANCE INDUSTRY

The intra-industry effect of Lloyd's financial distress on publicly tr aded US insurance companies is examined. Given Lloyd's prominence in t he international insurance industry, large losses raised questions abo ut the industry's capacity for certain types of risks and the financia l solvency of other insurers. The market value of US property-liabilit y insurers fell significantly at the announcement. This decline is rel ated to the firm's revenues from insurance and reinsurance exposure, R esults support contagion between Lloyd's distress and the US insurance industry. The study raises concerns about the potential for a systema tic disruption of the supply of reinsurance in the international marke tplace.