Cost versus Risk – Interpreting 2018’s Billion-Dollar Disasters and Planning for the Future

Cost versus Risk – Interpreting 2018’s Billion-Dollar Disasters and Planning for the Future

February 25, 2019

2018’s disasters cost the United States billions of dollars and, more importantly, hundreds of lives. Is this part of a pattern, and what can we do to break it?

February 25, 2019 - On February 6, 2019, the National Oceanic and Atmospheric Administration (NOAA) released two reports that laid out the stark realities of the state of the US and global climate. The US report concluded that the US experienced 14 billion-dollar weather and climate disasters in 2018, with 247 known fatalities associated with these events. Total monetary costs of disasters for the year reached $91 billion. In addition to giving us one more point in a trend of increasing disaster costs, the price tag of 2018’s disasters further underscores the need to spend money on disasters before they hit. What does spending money on disasters before they hit look like? Investments in preparedness and mitigation. Mitigation investments can save us billions in the long run by allowing us to prevent damage to infrastructure, local economies, and human health instead of scrambling to rebuild after the damage has been done.

High damage potential leads to a surge of disaster costs

2017 remains the costliest year ever for natural disasters in the United States, after a staggering $306 billion in costs shattered 2005’s previous record of $215 billion. Although 2017’s disasters were more than three times as costly for the US as those of 2018, $91 billion is no small amount. In fact, we’ve only recently started seeing numbers like this – the first year to even come close to $100 billion in damages was 2004, during which Hurricanes Jeanne, Ivan, Frances, and Charley, plus a series of severe storms, cost the US about $75 billion.

As a result, 2018’s disaster damages make it the fourth costliest year since 1980.

Figure 1. Five costliest years of disasters in the United States since 1980

Source: NOAA National Centers for Environmental Information (NCEI)

Worryingly, close to half of total disaster costs (45%) in the United States since 1980 were incurred in the last decade alone. It took just a decade for us to rack up $755.6 billion in damages, compared to the nearly three decades before, during which disasters cost a total of $914.9 billion. The last 10 years of disaster damages is almost twice (1.7 times) the amount spent by federal, state, and local governments combined for transportation and water infrastructure in 2017 ($441 billion). 

Figure 2. Cost of billion-dollar events across different periods from 1980 – 2018


Think these costs are high? They’re almost definitely an underestimate

Disasters also have cascading impacts on the lives and economies of the areas they affect that are not captured by standard loss calculations. Even NOAA’s loss calculations do not take into account damages to natural capital, nor do they consider healthcare-related losses. In addition to the initial losses suffered due to destroyed business and homes, disasters slow economic development as communities are forced to rebuild instead of grow. Other factors, including socioeconomic status, demographics, and health conditions, also mean that different populations experience disasters and disaster costs differently.

Even without taking into account the significant health impacts of events, NOAA’s estimates show that we have definitely paid more for disasters in recent years. While studies show that weather and climate disasters are becoming more frequent and more intense due to climate change, this is not the only reason for increasing disaster costs. Disaster costs are rising because damage potential is, which is in turn rising due to increasing risk.

Beyond cost: damage potential and risk

According to NOAA, increases in population and material wealth in recent decades result in higher potential for damage to lives and assets. These trends often come together in population centers and in vulnerable areas, such as coastal cities and river floodplains. Combined, these factors result in pockets of high damage potential that, when affected by an event, result in high costs.

In other words, disasters are getting costlier not only because they are categorically more intense, or even just because they’re happening more often, they’re getting costlier because we have more to lose than ever before.

Cost is a helpful measure for tracking the increasing damages and risk, but as we have seen, does not give us a complete picture of disaster impacts, especially when it comes to long-term effects on communities’ health and well-being. The real question we should be asking and acting on to protect ourselves and our communities, then, is not “how do we decrease disaster costs?”, but “how do we decrease our overall damage potential – that is, how do we decrease our disaster risk?”

Saving on (all kinds) of costs in the long-run with resilience

In the face of increasing frequency, intensity, and damage potential of disasters, it is imperative we invest in resilience. By investing in resilience as a preparedness measure for disasters, we can directly target risk at the community and system levels, thus reducing damage potential and costs. Resilience is cost-effective, too. From global insurance companies to national research nonprofits, groups have been showing that investments in resilience pay off by preparing communities to withstand and bounce back from disasters.

Investments in resilience benefit infrastructure as well as people, and as a result, help mitigate non-monetary costs of disasters. Healthcare Ready, as a mission-driven nonprofit, works to build resilience to mitigate disaster risk to improve outcomes for patients. We know that certain patient and socioeconomic groups are particularly vulnerable in the face of disaster – preparing them and their communities for the specific challenges they may face has the power to prevent damage to both their health and finances.

Stay tuned for a second blog on this topic, where I’ll give an introduction to disaster risk, plus a take a deeper look at the critical role of resilience in reducing it.

Courtney Romolt

Courtney Romolt is a Program Analyst at Healthcare Ready, where she provides research and communications support for a wide variety of programs and initiatives. Before joining Healthcare Ready, Courtney worked with the World Resources Institute’s Initiative 20x20 to promote the business case for landscape restoration in Latin America and the Caribbean. Prior to this, she researched the environmental effects, economic trends, and regulatory framework of enhanced oil recovery as a Graduate Consultant for the NGO Clean Water Action. Courtney holds a Masters of Arts in International Economics and Energy, Resources and the Environment from the Johns Hopkins School of Advanced International Studies, where she also earned a Graduate Certificate in Chinese and American Studies in Nanjing, China. Courtney also holds undergraduate degrees in Integrative Biology and Global Studies from the University of Illinois at Urbana-Champaign.