Natural disasters

RECENT NEWS
Reuters  Nov 19  Comment 
U.S. regulators are poised to adopt new rules that would require stock exchanges and some larger trading platforms to take steps to protect against market disruptions such as technology glitches or natural disasters.
New York Times  Nov 13  Comment 
“Nature’s Fury: The Science of Natural Disasters” examines the immense forces wielded by earthquakes, volcanoes, tornadoes and hurricanes.
Red Orbit  Nov 9  Comment 
Brett Smith for redOrbit.com - Your Universe Online Every year, wildfires exact a toll on humanity and a new research paper in the journal Nature suggests a rethinking of how we approach these massive blazes. According to the international...
Forbes  Nov 1  Comment 
Retailers often come to the aid of people or communities in need. After natural disasters, and even man-made ones, retailers are quick to rally and offer help. But will they step up to aid those who aren't customers?
Insurance Journal  Oct 30  Comment 
Boston has made significant strides in preparing for major natural disasters, rising sea levels and other impacts to the ever-changing climate, Mayor Martin Walsh said on the two-year anniversary of Superstorm Sandy. Speaking at the Architecture...
Insurance Journal  Oct 27  Comment 
The state of Michigan has broken ground on a new $22 million emergency operations center in the Lansing area. Officials expect the building to open in November 2015 and say it will be “hardened” to withstand natural disasters so response...
New York Times  Oct 27  Comment 
Upcoming events include a thriller about a British mathematician, an exhibition on the science of natural disasters and a musical about the many worlds of the physicist Hugh Everett III.
Insurance Journal  Oct 27  Comment 
State Farm insurance company is seeking federal approval to test drones in evaluating property damage and responding to natural disasters. The (Bloomington) Pantagraph reported that the Bloomington-based company has filed an application with the...
Clusterstock  Oct 14  Comment 
Natural disasters are having increasingly focused impacts on countries and communities, and these will need to prepare better for the future, according to an OECD report. This chart, from the report, shows that the overall number of disasters...
CNNMoney.com  Oct 7  Comment 
Even though the largest Ebola outbreak in history has been dominating headlines, few Americans are opening their wallets to help.




 
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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