Fire and Floods: The Economic Impact of Natural Disasters

Annual losses from disasters have trended upwards in recent times and have caused $1.7 trillion in economic losses between 1980 and 2018.

According to research on natural disasters by the Urban Institute, one of the key reasons for the increased losses has been the rise in the occurrence of natural disasters. The research also highlighted the changes in the prevalence of wildfires, both their annual numbers and their place in the disaster reporting system.

It revealed that hurricanes were more likely to cause damage than wildfires. In fact, hurricanes have caused roughly half the economic losses even though they accounted for only one in six major disaster events.

Citing data from the National Oceanic and Atmospheric Administration (NOAA) between 1980 to 2018, the research said that 2017 was the most expensive year for major disasters during this period.

It indicated that in 2018 dollars, losses between 1980 and 2017 totaled $1.7 trillion. Of these, 2017 had the highest annual losses at $313 billion, primarily from Hurricanes Harvey, Irma, and Maria. NOAA estimated their respective losses at $128 billion, $51 billion, and $92 billion (totaling $270 billion), "which is 26% larger than the 2005 total from the hurricane trio of Katrina, Rita, and Wilma ($215 billion).

Losses from wildfires were also at a historic maximum in 2017 and 2018, according to the NOAA data, destroying more than 15,000 homes, business, and other buildings. NOAA estimated these wildfire losses at $18.4 billion, "three times its next-highest previous wildfire loss estimate of $6.2 billion from the Oakland firestorm of 1991." In 2018, the losses from the Paradise wildfires were estimated at $24 billion.

Looking at the assistance provided by the Federal Emergency Management Agency (FEMA), during such events, the brief indicated that housing assistance made up the largest part of individual assistance (IA) given by FEMA. However, while public assistance (PA) has remained universally available, IA has declined in recent times.

The report indicated that of the 46 major disasters declared in 2016, FEMA authorized IA payments for only 18 compared with PA that was available for all the 46 major disasters. Another area that has seen a noteworthy decline in assistance is the Disaster Unemployment Assistance (DUA).

The research suggested that the comparative scale of IA and DUA payments must be recognized to understand this trend. Giving an example, the report said that in 2016, IA authorizations totaled $1.3 billion while DUA payments totaled only $3.7 million. This was because most IA payments compensated for property damage.

It concluded that major disasters are becoming more frequent, averaging from 13 per year in the 1950s to nearly 60 per year now. Fire management declarations have also increased, from less than five per year in the 1970s to nearly 50 per year now. All three categories of disasters (major disasters, emergency declarations, and fire management declarations) experience wide variation in annual occurrences.

Read the full research here.