Natural disasters

RECENT NEWS
Forbes  Sep 18  Comment 
Map out a plan in advance of natural disasters and review it with your team and clients.
MarketWatch  Sep 18  Comment 
Natural disasters can be a boon for commodities used in the recovery efforts that follow—and if that holds true for lumber, it would add to a parade of factors that could lift prices to levels they haven’t seen in over a decade.
Clusterstock  Sep 16  Comment 
Doomsday preppers are making a fortune off fears that the world is coming to an end. Rising S Company sells underground doomsday bunkers at every price point. The Texas-based manufacturer claims to have seen business soar between 500% and 700%...
Forbes  Sep 13  Comment 
As dual hurricanes have just finished pummeling the US, and other natural disasters from flooding in Asia to earthquakes in Mexico have done incredible damage, Blizzard has announced their stepping up with a new charity venture to raise money for...
CNNMoney.com  Sep 11  Comment 
Read full story for latest details.
TechCrunch  Sep 8  Comment 
 The American Red has teamed up with the UPS Foundation and drone manufacturer CyPhy Works to bring drones to sites of natural disasters. The goal is to use drones tethered to the ground to assess damages through constant aerial observations....
Mondo Visione  Sep 5  Comment 
The Office of the Comptroller of the Currency (OCC) today issued a proclamation allowing national banks and federal savings associations affected by Hurricane Irma to close. In issuing the proclamation, the OCC expects that only those bank...
Motley Fool  Sep 2  Comment 
When a natural disaster strikes, having these five things on hand could save you a lot of time, money, and peace of mind.




 
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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