Every nation in the world experiences some type of catastrophe. Earthquakes, floods, tsunamis and hurricanes rank among the most destructive and costly natural disasters. Only 10% of the damage was covered by insurance. But in the United States, 45% of the damage caused by weather-related events (which exceeded $1.6 trillion) was covered by insurance.
Losses from hurricanes, wildfires and other storms reached $306 billion in 2017, making it the most expensive year for weather disasters in U.S. history.
Along with the loss of human life, the impact of natural disasters on the economy must be taken into consideration. When a natural disaster hits, it affects communities and the lives of those living in the path of destruction. If we take a look at recent disasters, we can get a sense of how deeply a catastrophe can affect an entire nation.
Hurricane Irma
Hurricane Irma raged from August 30 to September 12, 2017 and was the most powerful Atlantic Ocean hurricane on record. Worldwide, it was the first storm to sustain maximum wind speeds of 185 miles per hour for 37 hours. Irma reached South Florida, a region where about 70% of buildings were built before 1994. According to some experts, it caused around $100 billion in damage. In the northern region of the state, Jacksonville experienced the worst flooding the city had ever seen.
The orange crop industry took a major blow. Irma caused more than $760 million in damage, destroying nearly all citrus fruit in parts of Southwest Florida. The beef cattle ($237 million), dairy ($12 million) and sugar ($382 million) industries also suffered losses.
Florida has laws in place to regulate price gouging, but companies like Amazon came under fire for raising prices on certain products before Hurricane Irma made landfall in the Sunshine State.
Price surging also emerged in Southeast Texas as record-breaking floods submerged Houston. Texas Attorney General Ken Paxton created a hotline to report price gouging. In some instances, a gallon of water went for $99 and hotel rooms cost three or four times more than usual. Best Buy apologized after a photo posted on Twitter showed a store in Houston selling a case of water for $42.96.
Hurricane Katrina
In 2005, Hurricane Katrina caused about $108 billion in damage. More than 200,000 homes in New Orleans were destroyed and recovering from the flood was a monumental undertaking. As a Category 5 hurricane, Katrina was a major natural disaster, displacing about 770,000 residents.
The effects of Hurricane Katrina rippled throughout the U.S economy. The hurricane affected the Gulf of Mexico, an area responsible for 29% of U.S. oil production.CLICK TO TWEET
The effects of Hurricane Katrina rippled throughout the U.S economy. The hurricane affected the Gulf of Mexico, an area responsible for 29% of U.S. oil production. Hurricane Rita touched down shortly thereafter and the two storms destroyed 113 offshore oil and gas platforms and damaged 457 pipelines. As a result, large amounts of crude oil were spilled. Oil prices rose to $3 a barrel and continued climbing. Eventually, the U.S. was forced to release oil from the Strategic Petroleum Reserve.
Hurricane Katrina had a devastating impact on the economy in New Orleans. The Bureau of Labor Statistics pooled data from the Quarterly Census of Employment and Wages to compare trends in employment and wages before and after the hurricane hit. The goal was to measure losses during the first 10 months following the storm. The over-the-year loss to the economy in New Orleans averaged 95,000 jobs. In November 2005, employment was 105,300 lower than it was a year earlier. By June 2006, the over-the-year loss had dropped to 92,900 and the loss in wages was about $2.9 billion.
Wildfires in California
In 2017, wildfires swept through Northern and Southern California causing an estimated $180 billion in damage.
In Northern California, total insurance losses exceeded $9 billion. Thousands of insurance claims — including 2,300 business property claims, almost 5,000 vehicle claims and 650 claims for other personal property — had been filed…CLICK TO TWEET
In Northern California, total insurance losses exceeded $9 billion. Thousands of insurance claims — including 2,300 business property claims, almost 5,000 vehicle claims and 650 claims for other personal property — had been filed with 260 insurers by Dec. 1. A large number of people are also expected to file insurance claims following the fires that threatened residents in Southern California. While insurance cash settlements will generate some economic activity in the months ahead, Californians are likely to see higher insurance premiums in the near future. Insurers and those tasked with reinsuring homeowners will unfortunately make up for the recent losses from hurricanes, wildfires and other catastrophes with higher premiums for all Americans over the course of the next several years.
Another impact of the wildfires is the strain they put on California’s state budget. Recently, state controller Betty Yee announced that revenues from November were up $449.8 million. The rising cost of fighting wildfires could put a serious dent in the budget.
Do you have questions about catastrophic loss and insurance coverage? Contact a Hippo specialist. We’re here to help!
