The recent earthquakes in Haiti and Chile come at the end of what may be history’s most expensive decade for natural disasters. The Inter-American Development Bank estimates that the Haitian earthquake dealt about $14 billion in damage. As large as that figure is, it’s relatively small compared with the costliest disaster of the past decade: Hurricane Katrina, which caused an estimated $125 billion in damage. According to Munich Re, one of the largest companies in the world that reinsures disaster risks for insurance companies, disasters’ costs to insurers have doubled in the past decade compared with the 1990s.
“The past decade has been the costliest for natural disasters ever,” writes Howard Kunreuther and Erwann Michel-Kerjan of the Wharton School of the University of Pennsylvania in their 2009 book, At War With the Weather. This decade follows a trend of massive increases in overall losses from disasters: Costs jumped from $93.3 billion in the 1960s to $778.3 billion in the 1990s.
The number of observed disasters is also rising—by about 5 percent per year since 1960. According to David Stromberg, associate professor at the Institute for International Economic Studies at Stockholm University, population growth (meaning more people come in contact with disasters) explains only about half of this increase. A more important factor behind the increase might be better reporting—better seismographs for earthquakes and more-responsive aid organizations.
While the economic cost of disasters has been rising, a perhaps more important value—the death toll—has been falling. From 1900 to 2003, 62 millions deaths resulted from natural disasters throughout the world. But 85 percent of those deaths occurred between 1900 and 1950.
Why the lower death toll, when the number of disasters has not dropped? The reason disasters are becoming less deadly is also the reason they are becoming more expensive.
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