Natural disasters

RECENT NEWS
TheStreet.com  Sep 5  Comment 
BOSTON (TheStreet) — San Francisco has earthquakes, Oklahoma City has tornadoes and New Orleans has hurricanes — but here's a look at five major U.S. communities that have the highest combined risk for all three. "Most places tend to have...
Insurance Journal  Sep 4  Comment 
Georgia is among 21 states failing to protect kids during natural disasters, particularly those who spend their days at child care centers throughout the state, according to a new report from a child aid organization released Tuesday. The report,...
Forbes  Aug 31  Comment 
Project Loon's goal is to deliver Internet access to people in rural and remote areas, fill in coverage gaps and bring people back online after natural disasters via a network of balloons.
TheStreet.com  Aug 29  Comment 
BOSTON (TheStreet) — With Northern California recently suffering its worst earthquake in 25 years and the Atlantic hurricane season approaching its peak period, you're probably wondering where it's safe to live — and here are five great...
guardian.co.uk  Aug 27  Comment 
Fewer natural disasters in first half of 2014 keeps economic costs down to below long-term average, Swiss Re figures show The global insurance industry covered $21bn (£12.7bn) of losses from disasters in the first half of 2014 as fewer natural...
BusinessWeek  Aug 25  Comment 
The damage estimates from the Napa Valley earthquake illustrate how natural disasters affect rich and poor countries
Insurance Journal  Aug 6  Comment 
The United States spends a lot of money responding to natural disasters but comparatively little trying to limit the costs of disasters before they happen. As the costs to the government and the insurance industry mount, more people in the...
The Hindu Business Line  Aug 6  Comment 
A “complete study” of Maharashtra would be conducted to identify villages prone to natural calamities in the aftermath of the landslide at Malin near Pune, Chief Minister Prithviraj Chavan has sai...
Forbes  Jul 28  Comment 
A new research project at the École Polytechnique Fédérale de Lausanne (EFPL) is working on using drones to help locate survivors of natural disasters through their mobile phones on the ground.
New York Times  Jul 25  Comment 
Improvements in life spans, education and incomes are slowing because of natural disasters, misguided government policies and worsening inequality, the United Nations said in a report.




 
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A natural disaster is the consequence of a natural hazard (e.g. hurricane, volcanic eruption, earthquake, landslide) which moves from potential in to an active phase, and as a result affects human activities[1]. Business is one such activity.

The International Red Cross, which publishes an annual World Disasters Report, says the economic cost of natural disasters has skyrocketed. In the past two decades alone, direct economic losses from natural disasters multiplied five fold to US$629 billion. Annual direct losses from weather-related events increased from an estimated $3.9 billion in the 1950s to $63 billion in the 1990s[2].

Natural disasters tend to affect insurance companies as well as local businesses affected by the disaster. The impact on other businesses can vary. For example, disruption in the oil drilling and refining activities in the Gulf of Mexico during the 2005 hurricane season caused some companies to lose revenue due to the loss of productive capacity, but also caused the price of oil to increase thus benefiting others in the industry. Landstar System, which has a contract to provide trucking services to the U.S. Government in the aftermath of natural disasters, was also a beneficiary[3].

Some studies have suggested that commodities provide an effective hedge against natural disasters because disasters such as floods, drought and hurricanes can affect commodity supply (see oil example above) and increase the price. However, the effect can differ across commodities - a drought could cause a shortage of corn and increase corn prices. The higher corn prices raises feed prices, which could cause ranchers to slaughter cattle earlier than usual and depress the price of that commodity in the short term.

Companies with negative exposure

Many companies are adversely impacted by the threat or actuality of natural disasters. Some include:

  • Property & Casualty insurance companies
  • Homebuilders and REITs with exposure to earthquake or hurricane prone regions
  • Travel and vacation companies, including cruise lines like Carnival (CCL) and Royal Caribbean Cruises (RCL) who operate in the Caribbean, where hurricanes are most common.
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