Property at Risk

• Main Authors: Elsner, James B, Kara, A Birol
• Format: Book Part
• Language: unknown
• Published: Oxford University PressNew York, NY 1999
• Subjects: North Atlantic
• Online Access: http://dx.doi.org/10.1093/oso/9780195125085.003.0018; https://academic.oup.com/book/chapter-pdf/52435248/isbn-9780195125085-book-part-18.pdf

Abstract Hurricanes kill and severely impact economies. Direct economic losses occur from property damage and from evacuation and preparation efforts. Population increases bring dramatic growth in property values, particularly in the United States. As a result, the economic losses in the United States caused by hurricanes have risen dramatically during the past several decades. In the early 1980s average annual losses approximated $1 billion. This amount is five times the average annual losses during the 1950s (Chen 1995). Despite the recent downturn in hurricane activity in the North Atlantic over the period 1991 through 1994 (see Chapter 12), frequent and damaging extratropical cyclone activity1 combined with two intense U.S. hurricanes (Andrew of the North Atlantic and Iniki2 of the eastern North Pacific) caused $40 billion in insured property losses (70% of which was covered by reinsurance companies). The financial losses seriously impacted the property insurance industry with a loss of nine firms to bankruptcy (Changnon et al. 1997). As a consequence, nearly $400 million of the losses went unpaid. The shakeup sent shivers through the insurance industry leading to a better appreciation of the key role climate hazards play in estimating potential losses from storms. Moreover, major hurricane disasters affect all Americans by diverting resources from other necessary public and private programs and by reducing the efficiency of the national economy. Property-loss potential across the West Indies is also on the rise. New resort developments featuring luxury hotels and tourist districts are being built along previously uninhabited beaches. The Caribbean coast of Mexico around Cancun is a spectacular example of new development in the path of future intense hurricanes. This chapter examines some of the economic impacts of U.S. hurricanes. We begin with a look at what causes the damage and factors related to the cost of preparation and evacuation efforts. We also examine the costliest hurricanes on record for the ...