The Impact of the COVID-19 Pandemic on Islamic Health Insurance Market Returns: Empirical Evidence from Saudi Arabia

This study aims to identify the impact of COVID-19 on the Cooperative Health Insurance (CHI) Market in Saudi Arabia by applying Event Study Methodology. The health event identified in this study is the announcement of the first positive case of COVID-19 in Saudi Arabia, which the Ministry of Health announced on March 2, 2020. For this study, the daily price of 24 cooperative health insurance companies listed on the Saudi Stock Market (Tadawul) and the market index (TASI) for the same period (June 05, 2018 -March 30, 2020) were collected. The abnormal returns are calculated using the Capital Asset Pricing Model (CAPM). The study found a negative effect of the COVID-19 pandemic on the health insurance companies in Saudi Arabia during the first week of the anticipation period that continued until the event day. Negative abnormal returns persisted until the end of the total study period but were not statistically significant except on only three days during the post-event window (March 05, 08, and 09, 2020). This means the Saudi cooperative insurance market experienced a period of anticipation and anxiety before the announcement of the first case of Covid-19; however, the information was insufficient and unconfirmed. During the adjustment window, the market tried to adjust itself and react to the event efficiently, but it could not do so. The results of this study are useful to takaful investors, operators, and regulators in the Islamic insurance markets and to researchers and academicians.