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A trend analysis of normalized insured damage from natural disasters

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  • Barthel, Fabian
  • Neumayer, Eric

Abstract

As the world becomes wealthier over time, inflation-adjusted insured damages from natural disasters go up as well. This article analyzes whether there is still a significant upward trend once insured natural disaster loss has been normalized. By scaling up loss from past disasters, normalization adjusts for the fact that a disaster of equal strength will typically cause more damage nowadays than in past years because of wealth accumulation over time. A trend analysis of normalized insured damage from natural disasters is not only of interest to the insurance industry, but can potentially be useful for attempts at detecting whether there has been an increase in the frequency and/or intensity of natural hazards, whether caused by natural climate variability or anthropogenic climate change. We analyze trends at the global level over the period 1990 to 2008, over the period 1980 to 2008 for Germany and 1973 to 2008 for the United States. We find no significant trends at the global level, but we detect statistically significant upward trends in normalized insured losses from all nongeophysical disasters as well as from certain specific disaster types in the United States and Germany.

Suggested Citation

  • Barthel, Fabian & Neumayer, Eric, 2010. "A trend analysis of normalized insured damage from natural disasters," LSE Research Online Documents on Economics 37600, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:37600
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    File URL: https://researchonline.lse.ac.uk/id/eprint/37600/
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    Cited by:

    1. Ashu Tiwari & Archana Patro, 2018. "Memory, Risk Aversion, and Nonlife Insurance Consumption: Evidence from Emerging and Developing Markets," Risks, MDPI, vol. 6(4), pages 1-17, December.
    2. 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.
    3. 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.
    4. Muhammad Uzair Qamar & Muhammad Azmat & Muhammad Adnan Shahid & Daniele Ganora & Shakil Ahmad & Muhammad Jehanzeb Masud Cheema & Muhammad Abrar Faiz & Abid Sarwar & Muhammad Shafeeque & Muhammad Imran, 2017. "Rainfall Extremes: a Novel Modeling Approach for Regionalization," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(6), pages 1975-1994, April.
    5. Andrew B. Martinez, 2025. "How do Macroeconomic Expectations React to Extreme Weather Shocks?," Working Papers 2025-001, The George Washington University, The Center for Economic Research.
    6. Christian L. E. Franzke, 2017. "Impacts of a Changing Climate on Economic Damages and Insurance," Economics of Disasters and Climate Change, Springer, vol. 1(1), pages 95-110, June.
    7. Franzke, Christian L.E., 2021. "Towards the development of economic damage functions for weather and climate extremes," Ecological Economics, Elsevier, vol. 189(C).
    8. Moran Nabriski & Ruslana Rachel Palatnik & Colin Price, 2025. "Insuring the future - the insurance industry’s role in climate change mitigation," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
    9. Wenjuan Sun & Paolo Bocchini & Brian D. Davison, 2020. "Applications of artificial intelligence for disaster management," 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. 103(3), pages 2631-2689, September.
    10. Unterberger, Christian & Hudson, Paul & Botzen, W.J. Wouter & Schroeer, Katharina & Steininger, Karl W., 2019. "Future Public Sector Flood Risk and Risk Sharing Arrangements: An Assessment for Austria," Ecological Economics, Elsevier, vol. 156(C), pages 153-163.
    11. Kousky, Carolyn & Michel-Kerjan, Erwann O. & Raschky, Paul A., 2018. "Does federal disaster assistance crowd out flood insurance?," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 150-164.
    12. Andrew Royal & Margaret Walls, 2019. "Flood Risk Perceptions and Insurance Choice: Do Decisions in the Floodplain Reflect Overoptimism?," Risk Analysis, John Wiley & Sons, vol. 39(5), pages 1088-1104, May.
    13. Seungil Yum, 2023. "Spatial response and power law distribution according to Winter storm Jonas," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(6), pages 5241-5255, December.
    14. Reyes, Julian & Elias, Emile & Haacker, Erin & Kremen, Amy & Parker, Lauren & Rottler, Caitlin, 2020. "Assessing agricultural risk management using historic crop insurance loss data over the ogallala aquifer," Agricultural Water Management, Elsevier, vol. 232(C).
    15. Timothy Davies, 2015. "Developing resilience to naturally triggered disasters," Environment Systems and Decisions, Springer, vol. 35(2), pages 237-251, June.
    16. Cenacchi, Nicola, 2014. "Drought risk reduction in agriculture: A review of adaptive strategies in East Africa and the Indo-Gangetic plain of South Asia," IFPRI discussion papers 1372, International Food Policy Research Institute (IFPRI).
    17. Donghyun Choi & David Oliver Kasdan & D. K. Yoon, 2019. "Analyzing Disaster Loss Trends: A Comparison of Normalization Methodologies in South Korea," Risk Analysis, John Wiley & Sons, vol. 39(4), pages 859-870, April.
    18. Christopher Burgess & Michael Taylor & Tannecia Stephenson & Arpita Mandal & Leiska Powell, 2015. "A macro-scale flood risk model for Jamaica with impact of climate variability," 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. 78(1), pages 231-256, August.
    19. Christian Unterberger, 2018. "How Flood Damages to Public Infrastructure Affect Municipal Budget Indicators," Economics of Disasters and Climate Change, Springer, vol. 2(1), pages 5-20, April.
    20. Mark Brennan & Aditi Mehta & Justin Steil, 2022. "In Harm's Way? The Effect of Disasters on the Magnitude and Location of Low‐Income Housing Tax Credit Allocations," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(2), pages 486-514, March.
    21. Hans Visser & Arthur Petersen & Willem Ligtvoet, 2014. "On the relation between weather-related disaster impacts, vulnerability and climate change," Climatic Change, Springer, vol. 125(3), pages 461-477, August.
    22. 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.
    23. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
    24. Valente, Donatella & Miglietta, Pier Paolo & Porrini, Donatella & Pasimeni, Maria Rita & Zurlini, Giovanni & Petrosillo, Irene, 2019. "A first analysis on the need to integrate ecological aspects into financial insurance," Ecological Modelling, Elsevier, vol. 392(C), pages 117-127.
    25. Matteo Coronese & Francesco Lamperti & Francesco Chiaromonte & Andrea Roventini, 2018. "Natural disaster Risk and the Distributional Dynamics of Damages," Documents de Travail de l'OFCE 2018-26, Observatoire Francais des Conjonctures Economiques (OFCE).

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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