Despite a series of unprecedented disasters that have unfolded in the past decades, there has been little economic analysis about corporate demand for catastrophe insurance. Using a unique dataset of 1,808 large U.S. corporations, this study provides the first empirical analysis that compares corporate demand for standard property insurance and for catastrophe coverage (here, terrorism) using a demand-supply system equation. The main finding of this study is that corporate demand for

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... insurance is more price inelastic than for non-catastrophe insurance. This result differs from the existing findings on homeowners' demand for catastrophe insurance which has been shown to be price elastic. Further, larger companies are more likely to have some catastrophe coverage and a higher solvency ratio reduces demand for such coverage. Our results further suggest that free federal reinsurance under TRIA has led insurers to be less cautious about risk diversification in the case of terrorism risk than they are on the property side.