IDEAS home Printed from https://ideas.repec.org/a/spr/envsyd/v44y2024i1d10.1007_s10669-023-09912-3.html
   My bibliography  Save this article

Time series analysis and probabilistic model of the financial costs of major disasters in the USA

Author

Listed:
  • Charchit Shukla

    (Iowa State University)

  • Cameron A. MacKenzie

    (Iowa State University)

Abstract

The number of billion-dollar natural disasters in the USA has increased from 28 in 1980–1989 to 105 in 2010–2018. During these same time periods, the total cost of these natural disasters increased from $172 billion to $755 billion. Generating probabilistic assessments of the cost of these billion-dollar natural disasters can provide insight into the financial risks posed by these disasters while accounting for the uncertainty and variation in these disasters. This article simulates the frequency and cost of billion-dollar disasters and analyses the financial risk of these disasters in the USA. We use a probabilistic approach to quantify and create five models. These models are created by fitting probability distributions to the historical cost of billion-dollar disasters. The model that fits the data best and accounts for the recent increase in the cost and frequency of billion-dollar disasters forecasts that the expected annual cost of these disasters is $91 billion, with about a 1% chance that the annual costs could exceed $500 billion. Simulating the costs and frequency of natural disasters provides an understanding of the risks of different types of disasters in the USA.

Suggested Citation

  • Charchit Shukla & Cameron A. MacKenzie, 2024. "Time series analysis and probabilistic model of the financial costs of major disasters in the USA," Environment Systems and Decisions, Springer, vol. 44(1), pages 30-44, March.
    • Handle: RePEc:spr:envsyd:v:44:y:2024:i:1:d:10.1007_s10669-023-09912-3
    DOI: 10.1007/s10669-023-09912-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10669-023-09912-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10669-023-09912-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hoffmann, Roman & Muttarak, Raya, 2017. "Learn from the Past, Prepare for the Future: Impacts of Education and Experience on Disaster Preparedness in the Philippines and Thailand," World Development, Elsevier, vol. 96(C), pages 32-51.
    2. Holger Strulik & Timo Trimborn, 2019. "Natural Disasters and Macroeconomic Performance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(4), pages 1069-1098, April.
    3. James B. Elsner & James P. Kossin & Thomas H. Jagger, 2008. "The increasing intensity of the strongest tropical cyclones," Nature, Nature, vol. 455(7209), pages 92-95, September.
    4. Howard C. Kunreuther & Erwann O. Michel-Kerjan, 2007. "Climate Change, Insurability of Large-scale Disasters and the Emerging Liability Challenge," NBER Working Papers 12821, National Bureau of Economic Research, Inc.
    5. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    6. Stanley Kaplan & B. John Garrick, 1981. "On The Quantitative Definition of Risk," Risk Analysis, John Wiley & Sons, vol. 1(1), pages 11-27, March.
    7. Adam Rose & Shu‐Yi Liao, 2005. "Modeling Regional Economic Resilience to Disasters: A Computable General Equilibrium Analysis of Water Service Disruptions," Journal of Regional Science, Wiley Blackwell, vol. 45(1), pages 75-112, February.
    8. Pardeep Pall & Tolu Aina & Dáithí A. Stone & Peter A. Stott & Toru Nozawa & Arno G. J. Hilberts & Dag Lohmann & Myles R. Allen, 2011. "Anthropogenic greenhouse gas contribution to flood risk in England and Wales in autumn 2000," Nature, Nature, vol. 470(7334), pages 382-385, February.
    9. Adam Smith & Jessica Matthews, 2015. "Quantifying uncertainty and variable sensitivity within the US billion-dollar weather and climate disaster cost estimates," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 77(3), pages 1829-1851, July.
    10. He, Fei & Zhuang, Jun, 2016. "Balancing pre-disaster preparedness and post-disaster relief," European Journal of Operational Research, Elsevier, vol. 252(1), pages 246-256.
    11. Gale, William & Pence, Karen, 2006. "Are Successive Generations Getting Wealthier, and If So, Why?Evidence from the 1990s," MPRA Paper 55502, University Library of Munich, Germany.
    12. Jan Oosterhaven & Maaike C. Bouwmeester, 2016. "A New Approach To Modeling The Impact Of Disruptive Events," Journal of Regional Science, Wiley Blackwell, vol. 56(4), pages 583-595, September.
    13. Adam Smith & Richard Katz, 2013. "US billion-dollar weather and climate disasters: data sources, trends, accuracy and biases," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 67(2), pages 387-410, June.
    14. Alice Fothergill & Lori Peek, 2004. "Poverty and Disasters in the United States: A Review of Recent Sociological Findings," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 32(1), pages 89-110, May.
    15. Mr. Michael Keen & Mr. Paul K. Freeman & Mr. Muthukumara Mani, 2003. "Dealing with Increased Risk of Natural Disasters: Challenges and Options," IMF Working Papers 2003/197, International Monetary Fund.
    16. Willaim G. Gale & Karen M. Pence, 2006. "Are Successive Generations Getting Wealthier, and If So, Why?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 155-234.
    17. Dudley, Susan E. & Pérez, Daniel R. & Mannix, Brian F. & Carrigan, Christopher, 2019. "Dynamic Benefit-Cost Analysis for Uncertain Futures," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 10(2), pages 206-225, July.
    18. Howard Kunreuther, 2002. "Risk Analysis and Risk Management in an Uncertain World," Risk Analysis, John Wiley & Sons, vol. 22(4), pages 655-664, August.
    19. Mary Downton & Roger Pielke, 2005. "How Accurate are Disaster Loss Data? The Case of U.S. Flood Damage," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 35(2), pages 211-228, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters - A Survey," Working Papers 200919, University of Hawaii at Manoa, Department of Economics.
    2. Wenzel, Lars & Wolf, André, 2013. "Protection against major catastrophes: An economic perspective," HWWI Research Papers 137, Hamburg Institute of International Economics (HWWI).
    3. Michael Greenberg, 2011. "Risk analysis and port security: some contextual observations and considerations," Annals of Operations Research, Springer, vol. 187(1), pages 121-136, July.
    4. Jungmin Lim & Mark Skidmore, 2019. "Flood Fatalities in the United States: The Roles of Socioeconomic Factors and the National Flood Insurance Program," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1032-1057, April.
    5. Sisi Meng & Pallab Mozumder, 2021. "Hurricane Sandy: Damages, Disruptions and Pathways to Recovery," Economics of Disasters and Climate Change, Springer, vol. 5(2), pages 223-247, July.
    6. Young Seok Song & Moo Jong Park, 2018. "A Study on Estimation Equation for Damage and Recovery Costs Considering Human Losses Focused on Natural Disasters in the Republic of Korea," Sustainability, MDPI, vol. 10(9), pages 1-16, August.
    7. Matteo Coronese & Davide Luzzati, 2022. "Economic impacts of natural hazards and complexity science: a critical review," LEM Papers Series 2022/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Thilini Mahanama & Abootaleb Shirvani & Svetlozar Rachev, 2022. "A Natural Disasters Index," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 24(2), pages 263-284, April.
    9. Waitkus, Nora & Minkus, Lara, 2021. "Investigating the gender wealth gap across occupational classes," LSE Research Online Documents on Economics 108206, London School of Economics and Political Science, LSE Library.
    10. Rui Huang & Arunima Malik & Manfred Lenzen & Yutong Jin & Yafei Wang & Futu Faturay & Zhiyi Zhu, 2022. "Supply-chain impacts of Sichuan earthquake: a case study using disaster input–output analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 110(3), pages 2227-2248, February.
    11. Fabian Barthel & Eric Neumayer, 2012. "A trend analysis of normalized insured damage from natural disasters," Climatic Change, Springer, vol. 113(2), pages 215-237, July.
    12. Lorenzo Carrera & Gabriele Standardi & Francesco Bosello & Jaroslav Mysiak, 2014. "Assessing Direct and Indirect Economic Impacts of a Flood Event Through the Integration of Spatial and Computable General Equilibrium Modelling," Working Papers 2014.82, Fondazione Eni Enrico Mattei.
    13. Balbi Stefano & Giupponi Carlo & Olschewski Roland & Mojtahed Vahid, 2015. "The Total Cost of Water-Related Disasters," Review of Economics, De Gruyter, vol. 66(2), pages 225-252, August.
    14. Pradeep V. Mandapaka & Edmond Y. M. Lo, 2023. "Assessing Shock Propagation and Cascading Uncertainties Using the Input–Output Framework: Analysis of an Oil Refinery Accident in Singapore," Sustainability, MDPI, vol. 15(2), pages 1-24, January.
    15. Kellenberg, Derek K. & Mobarak, Ahmed Mushfiq, 2008. "Does rising income increase or decrease damage risk from natural disasters?," Journal of Urban Economics, Elsevier, vol. 63(3), pages 788-802, May.
    16. Thilini V. Mahanama & Abootaleb Shirvani, 2020. "A Natural Disasters Index," Papers 2008.03672, arXiv.org.
    17. Joan Costa-Font, 2013. "Housing-related Well-being in Older People: The Impact of Environmental and Financial Influences," Urban Studies, Urban Studies Journal Limited, vol. 50(4), pages 657-673, March.
    18. Xavier Romão & Esmeralda Paupério, 2016. "A framework to assess quality and uncertainty in disaster loss data," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 83(2), pages 1077-1102, September.
    19. Michael R. Greenberg & Michael Lahr & Nancy Mantell, 2007. "Understanding the Economic Costs and Benefits of Catastrophes and Their Aftermath: A Review and Suggestions for the U.S. Federal Government," Risk Analysis, John Wiley & Sons, vol. 27(1), pages 83-96, February.
    20. Zhang Sisi & Feng Shuaizhang, 2017. "Understanding the Unequal Post-Great Recession Wealth Recovery for American Families," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(4), pages 1-18, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:envsyd:v:44:y:2024:i:1:d:10.1007_s10669-023-09912-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.