Natural disasters

RECENT NEWS
The Economic Times  Aug 3  Comment 
Financial issues have plagued Greece, but the history of closures on the 139-year old bourse is also the history of war, invasion, coups and natural disasters.
Insurance Journal  Jul 29  Comment 
Deschutes County in Oregon has updated its plan for dealing with natural disasters, including the potential Cascadia Subduction Zone earthquake that recently received national attention. The Bulletin reported that county commissioners adopted the...
Reuters  Jul 20  Comment 
* Not limited to poor countries; people displaced in Japan, USA
Cloud Computing  Jul 9  Comment 
When business disruption, occurs, it is more likely to sneak in through your defenses than it is to overwhelm you by fire, flood, earthquake or hurricane. Instead of breaking in through your walls and ceilings, it sneaks in through your defenses...
FiercePharma  Jun 24  Comment 
If you've spent any time reading biopharma's securities filings, you've noticed the litany of potential problems every company discloses--everything from natural disasters and terrorist attacks to patent lawsuits and regulatory setbacks.
Business Times - Malaysia  Jun 9  Comment 
THE two earthquakes, one measuring 6.1 and the other 4.3 on the Richter scale and epicentred in Ranau that shook Sabah recently, leaving a trail of destruction, have blown away the belief that we are free from natural disasters.
Clusterstock  Jun 7  Comment 
Some big names in the hedge fund world came together last week to raise money for victims of natural disasters — and to go head-to-head in the boxing ring. They were inspired by the story of Petra Němcová, a former Victoria's Secret model...
The Hindu Business Line  Jun 2  Comment 
Destructive as they may be, natural disasters offer nations a window of opportunity to rebuild themselves
Cellular News  Jun 1  Comment 
As the Caribbean prepares for the upcoming hurricane season, CandW has begun to test drone technology that would help expedite network and connectivity restoration in the aftermath of natural disasters such as a hurricane or a tropical storm....




 
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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