Natural Disasters: A Growing Financial Threat

Natural disasters have led to $6.9 trillion in economic losses since 1980, according to estimates by the insurance company Munich Re Group. Only around a third of these losses are thought to have been insured, meaning that many of those affected will have had to pay for the damages themselves.

Earthquakes and hurricanes tend to cause the most extreme damage in terms of economic costs. This is exemplified by the peak years seen on this chart, with Hurricane Katrina in 2005, the earthquake and tsunami that hit Japan in 2011 and the three major hurricanes that hit the U.S., Harvey, Maria and Irma, in 2017. In the latter year, global economic losses hit $424 billion, $183 billion of which were insured.

While these events account for the major fluctuations illustrated here, Munich Re analysts explain that the overall rising trend in economic costs is due to multiple factors. These include the increase in the values exposed to natural catastrophes as well as the effects of climate change as smaller natural catastrophes, such as severe thunderstorms, hail, flooding or wildfires, are becoming more intense or frequent.

Although this chart fails to show the immeasurable societal impacts of such disasters, it does highlight the uneven nature of the economic burden. According to Munich Re, in many developing and emerging countries, the insured population is under 10 percent.