Saturday, September 24, 2011

"Prepare yourself, natural disasters will only get worse"

The world has entered a new era of catastrophes. Economic losses from hurricanes, earthquakes and resulting tsunamis, floods, wildfires and other natural disasters increased from $528 billion (1981-1990) to more than $1.2 trillion over the period 2001-2010. The 9.0 earthquake and massive tsunami in Japan this past spring caused hundreds of billions of dollars of direct and indirect costs. It has affected the Japanese macroeconomic forecast and resulted in the departure of the then-prime minister. And before this, massive earthquakes in Haiti, Chile and New Zealand inflicted record human and financial losses as well.

Despite being the richest country in the world, America is still highly vulnerable to natural disasters. Two principal socioeconomic factors directly influence the level of economic losses due to catastrophic events: exposed population and value at risk. Florida, for example, has seen its population grow from 2.8 million inhabitants in 1950 to 18.8 million in 2010 (+570%). Increased population and development means an increased likelihood of severe economic and insured losses in Florida and other hurricane-prone regions unless cost-effective mitigation measures are implemented and the risk properly hedged. more