Natural Disasters Could Cost $750 Billion Annually in 15 Years: AIR Study

Economic losses from global natural catastrophes likely will triple over the next 15 years, unless steps are taken to reduce bad development choices, according to preliminary results of a catastrophe modeling study presented at the third UN World Conference on Disaster Risk Reduction in Sendai, Japan.

The study, which was conducted by the Boston-based modeling firm AIR Worldwide, examines the trend of growing economic losses from global natural catastrophes by looking at nearly 20 years of historical events.

AIR normalized these losses based on today’s conditions including changes in population, wealth, and urbanization of catastrophe prone areas, finding that they oscillate around a baseline value of $240 billion.

During a press conference to unveil the preliminary results of the study, Dr. Milan Simic, managing director of international operations at AIR Worldwide, said the study revealed this figure is expected to triple to $750 billion over the next 15 years if these risks are not better managed by governments across the globe.

“Although global catastrophe losses are trending upwards over the past decades, much of this can be attributed to population and wealth growth, and an increase in properties being built in areas of high catastrophe risk, such as coastlines,” he said.

“This study tells us that the way we do development is the reason why economic losses are so high. Development drivers are stronger drivers of the increase of risks than hazards themselves. In order to limit economic losses in the future, we need to improve urban planning and make economic growth resilient,” according to Jerry Velasquez, chief of advocacy and outreach for the United Nations Office for Disaster Risk Reduction (UNISDR), which commissioned the study. (Velasquez is also coordinator of UNISDR’s Making Cities Resilient Campaign.)

To reduce that upward trend, “you basically need to address risks that are going to be generated in the future,” Velasquez said during the press conference.

One such future risk scenario is being created in the state of Florida, he said, where about 500 permits are issued daily for new buildings in coastal areas, which are highly exposed to hurricanes and hence to economic losses.

If that continues for the next 15 years, there will be more and more high value properties at risk in the “cyclone belt,” he said.

Velasquez cited another example of a poor development decision: a factory built in a flood prone area. This not only would create a potential property risk, but also would endanger those factory workers who live in the area, he emphasized.

“We want wealth and we want growth, but we want wealth and growth that does not create risk,” he said, noting that economic growth and wealth creation should be “disaster-resilient.”

“Risks are driven by bad development choices. So we need to make development more resilient.”

The preliminary AIR study recommends a focus on improving the availability of economic loss data, cost benefit analyses of measures such as land-use and urban planning, and the promotion of risk transfer.

The full global study will be made available in July and will provide a breakdown of economic losses by region, according to a statement issued by AIR.