Natural disasters

RECENT NEWS
Forbes  Apr 27  Comment 
How advances in deep learning can be used to watch the daily firehose of global news imagery to catalog illegal dumping, assess smog levels and even send flash flooding alerts, all by having AI look at news photographs
Insurance Journal  Apr 24  Comment 
Physical property damage due to natural disasters, weather-related or man-made incidents, can be relatively straightforward to assess, but understanding how a different form of property causes damage can be a little more ambiguous, according to...
Forbes  Apr 20  Comment 
Supply chain risk management has enjoyed a rise in prominence over the past decade as natural disasters and strikes have shone a light on the value of resilience. However, concerns about war remain largely off the radar. Kevin explains why this...
Insurance Journal  Apr 17  Comment 
Natural disasters can strike at any time, often without warning, and devastate cities, regions, states and countries. Nature Unleashed, a new exhibit at the Indiana State Museum, aims to help Hoosiers understand why tornadoes, earthquakes,...
Insurance Journal  Apr 12  Comment 
Natural disasters can strike at any time, often without warning, and devastate cities, regions, states and countries. Nature Unleashed, a new exhibit at the Indiana State Museum, aims to help Hoosiers understand why tornadoes, earthquakes,...
The Hindu Business Line  Apr 11  Comment 
Tamil Nadu has created a team of nearly 14,500 ‘first responders’ in areas vulnerable to natural disasters. They will be the first ones to be present at the spot to carry out emergency operations...
guardian.co.uk  Apr 9  Comment 
The rationalisations and concessions are starting to emerge as the reality of leaving dawns. This is not the moment for Remainers to despair There is nothing one can do to avoid natural disasters, or “acts of God” as they used to be called....
Forbes  Mar 14  Comment 
HiGi Energy CEO Jackie Yap sees cleantech playing a significant economic role at both the local and national levels in the Philippines. He said cleantech can also make poor, rural communities more resilient when faced with natural disasters.
Cloud Computing  Mar 14  Comment 
In the age of global cyberattacks, corporate enterprises and government agencies that have some type of cloud-based network solutions should be looking at a strategic design focus that guarantees a very secure intelligent infrastructure...
Insurance Journal  Mar 3  Comment 
Ironshore Specialty Casualty’s Public Entity division has introduced a policy extension offering institutions of higher education an automatic endorsement for expenses related to natural or man-made incidents, including active shooter and weapon...




 
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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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