Natural disasters

RECENT NEWS
Forbes  May 12  Comment 
Mapping, data and real-time weather feeds help firms increase profits in recreational sales and respond faster after natural disasters.
The Times of India  May 11  Comment 
You can't stop calamities but you can minimize their impact on your finances.
The Economic Times  Apr 28  Comment 
According to a report by the United Nations, Asia Pacific is the world's most disaster prone area, with natural disasters contracting the growth rate of countries.
TechCrunch  Apr 9  Comment 
 When Cyclone Pam hit Vanuatu, it struck a very vulnerable target. The Pacific nation is considered one of the world’s poorest and is ranked by the United Nations’ WorldRiskIndex as the most disaster-prone country. Yet for a storm...
Insurance Journal  Apr 9  Comment 
With more severe thunderstorms and possibly tornadoes in the forecast for portions of the central U.S. today, the Property Casualty Insurers Association of America (PCI) says a recent survey conducted by Harris Poll on behalf of PCI shows that...
Financial Times  Mar 25  Comment 
Responses to natural disasters to help test banks in US and UK
Insurance Journal  Mar 19  Comment 
Economic losses from global natural catastrophes likely will triple over the next 15 years, unless steps are taken to reduce bad development choices, according to preliminary results of a catastrophe modeling study presented at the third UN World...
TechCrunch  Mar 19  Comment 
 SXSW is a zoo in and of itself, but the Interactive portion of the festival actually had a robot petting zoo within the event this year. While some may think of robots as scary things that could destroy us all and lead to some sort of dystopian...
MarketWatch  Mar 11  Comment 
The frequency of terrorism and natural disasters has changed the nature of urban safety. Here are the 10 safest cities in the world.
USDA  Feb 26  Comment 
WASHINGTON, Feb. 26, 2015 - Agriculture Secretary Tom Vilsack announced today that USDA's Natural Resources Conservation Service will invest an additional $84 million through the Emergency Watershed Protection Program (EWP) to help disaster...




 
TOP CONTRIBUTORS

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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