This study examines the impact of credit rating announcements on stock returns 0f 12 insurance companies listed in Karachi Stock Exchange. Daily stock returns have been used, covering period from 2008 to 2013. The study event study methodology; a fifteen days event window has been created to examine the effects of credit rating announcements on KSE stock returns. The study finds that credit rating announcements has no significant impact on sample insurance companies’ abnormal returns. This study also documents the reaction of stock returns to the upgrade and downgrade announcement of credit rating. The study reveals that downgrade announcement show insignificant positive response, whereas the upgrade announcement provides insignificant negative response. Supervisors:-Dr. Attiya Yasmin Javaid