Nguyen CN, Noy I. 2019. Measuring the impact of insurance on urban earthquake recovery using nightlights. Journal of Economic Geography. 20(3):857-877. doi:10.1093/jeg/lbz033.
We measure the longer-term effect of a major earthquake on the local economy. To do this we use night-time light intensity and focus on the role of insurance payments for damaged residential property in the recovery process. The Canterbury Earthquake Sequence (2010–2011) in Aotearoa New Zealand is our case study.
Uniquely, more than 95% of residential housing units in the area affected by this event were covered by insurance and almost all incurred some damage. However, insurance pay outs were staggered over 5 years, enabling us to identify their local impact on recovery. We find that streetlights and other light seen from space can capture the process of recovery. We also found that insurance payments contributed significantly to the process of local economic recovery after the earthquake. Cash settlement of claims was no more effective than insurance-managed repairs in generating local recovery. Notably, delayed payments were less effective in assisting recovery. This suggests an important role for the regulator in making sure insurance payments are made promptly after disaster events.