24 October 2017 Insurance

Cost per natural disaster falls

While the frequency of natural disasters has continued to increase, data indicate that the real cost per disaster has been declining since 1970, according to PwC analysis. But with more disasters being recorded, the total cost of damages continues to climb.

PwC’s October Global Economy Watch suggests that the apparent downward trend in cost per disaster may be driven by preventive measures, such as early warning systems for severe weather or laws that encourage maintaining wetlands in flood-prone areas to absorb excess water.

PwC analysis of the latest data from the Centre for Research on the Epidemiology of Disasters (CRED) found that the recorded number of natural disasters rose by an average rate of just over 3 percent per year between 1970 and 2016.

However, given the variability of natural disasters there are significant peaks and troughs throughout the period. CRED data show there were 348 natural disasters globally in 2016, costing roughly $150 billion in 2016 dollar terms. This figure includes physical damage to property and assets, but does not quantify loss of life or revenue as a direct result of natural disasters.

Barret Kupelian, senior economist at PwC, said: “Overall, economic output may not be significantly impacted by natural disasters in the long run, but these events cause devastation for those affected. They are also becoming more prevalent and costly on a global scale.

“The increase in the real costs of natural disasters should serve as a reminder to businesses and governing bodies of the importance of increasing the risk-resilience of hard infrastructure and prioritising the management of the impacts of extreme natural events.”

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