Natural disasters

Insurance Journal  Apr 19  Comment 
The insurance industry, the United Nations and the World Bank have formed a public-private partnership designed to help bridge the “protection gap” for developing nations, which struggle increasingly from the burden of uninsured economic...  Mar 23  Comment 
Inga Beale, Lloyd’s of London boss, says terrorism is bigger risk than earthquakes and hurricanes as insurer posts 30% fall in profits The chief executive of insurance market Lloyd’s of London has warned that manmade risks such as terrorism,...
Forbes  Mar 21  Comment 
A few years ago, when Hurricane Sandy brought its 74 mph winds across New York and New Jersey, few could imagine the storm’s widespread impact. Dubbed the nation’s “most expensive hurricane”, Sandy reportedly caused nearly $400 million in...
Forbes  Mar 14  Comment 
Devastation caused by natural disasters is both personal and economic.
Cloud Computing  Feb 29  Comment 
transform operational efficiency and safety for businesses and communities, especially during critical situations. During these critical events, man-made incidents or natural disasters, identifying and reaching employees with reliable and...
Forbes  Feb 23  Comment 
On April 9, 2015, at roughly 6:40 PM, an EF4 tornado tore through 30 miles of farmland northeast of Franklin Grove, Ill. Over the next 40 minutes, its winds gusted to 200 mph, destroying homes in Rochelle and Fairdale. Two people died, 22 were...
The Australian  Feb 10  Comment 
Suncorp has cut its dividend and flagged changes to its business model after natural disasters hit interim profits.
Insurance Journal  Feb 10  Comment 
January winter weather cost more than $4.0 billion of economic impact in the United States and Asia, according to Impact Forecasting, Aon Benfield’s catastrophe model development team, which evaluates the impact of natural disasters on a monthly...
New York Times  Feb 4  Comment 
After terrorist attacks, the financial crisis and natural disasters, Representative Carolyn B. Maloney believes the city could benefit from hosting the animals from China.
Insurance Journal  Jan 28  Comment 
It was a relatively quiet year for natural disasters – except for those living in the Western U.S. Property data provider CoreLogic today released its annual Natural Hazard Risk Summary and Analysis. The report shows “a continued trend of...


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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