When extreme weather disrupts communities, small businesses often wind up being the first responders and first casualties. Investing in small business resilience can translate into fewer closures, less unemployment, faster recovery, and stronger local spending after disasters strike.
Two trends are colliding in state finance offices: Emergency, or “rainy day,” funds are shrinking at the exact moment climate-related revenue losses are mounting.
States are seeing their emergency reserves shrink for the first time since the Great Recession. The path forward is a new, two-pronged pro-growth, pro-resilience model that expands the state’s economic base while simultaneously modernizing the financial tools used to protect it.
We're wrapping up one of the hottest summers on record and racing toward a very cold winter season. Against this backdrop, The Epicenter is taking a moment to revisit our Hazard Briefings, a series that explores opportunities for infrastructural resiliency to the most common disaster types.
Why are billion-dollar disasters suddenly everywhere? Are the most expensive disasters, like Hurricane Katrina, becoming more frequent? Or are the most frequent disasters, like a 30-minute hail storm, becoming more expensive?
The story is complex and nuanced: there are a small handful of factors that have conspired to create a perfect storm of expensive, frequent disasters, and four key categories of cost drivers have emerged:
The U.S.’s Fifth National Climate Assessment, released in 2023, found that climate change increases the frequency of weather extremes that lead to billion-dollar disasters. Extreme weather begets extreme weather, as Mathew Sanders of Pew Research explained, “Extreme heat can exacerbate drought conditions, increasing wildfire risk. Wildfires leave behind barren landscapes, where vegetation would otherwise reduce runoff, increasing flood risk and leaving hillsides vulnerable to mudslides.”
There are more assets at risk today than there were in the 1980s. NOAA credits both the increase in population and the increase in asset prices as key drivers of rising costs. Population growth, population migration, and unsustainable and discriminatory land use and development have pushed communities into harm's way. Today, 39% of all the houses in the U.S. are in the wildland-urban interface (WUI). The fastest growing states in the U.S.—Texas and Florida—are also the states with some of the greatest climate risk and highest frequency of disasters.
Greater vulnerability of an asset, as measured by the extent of damage caused by a given hazard, also drives up insured and uninsured costs. Without up-to-date building codes and new disaster-resilient construction materials and technologies, assets remain vulnerable to greater damage. Meanwhile, as insurance premiums spike, more homeowners are going without insurance (more than 1 in 10 U.S. homes is uninsured), further exacerbating the vulnerability of what is often a homeowner's most valuable asset: their home.
In the wake of a disaster, there is a rebuilding premium as a surge in demand outpaces supply, leading to soaring costs. According to a 2023 report by Harvard University’s Joint Center for Housing Studies, every year across the U.S., $20 billion is spent to repair homes following both minor storms and major disasters. This is a $3 billion annual increase from 2021 (just two years prior to the report), and nearly double the $12 billion spent annually between 2000 and 2010.
While these drivers increase overall disaster expenses, resiliency levers exist to reduce costs and build more resilient infrastructure.
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The Epicenter helps decision makers understand climate risks and discover viable resilience solutions. The Epicenter is an affiliated publication of The Resiliency Company, a 501(c)3 nonprofit dedicated to inspiring and empowering humanity to adapt to the accelerating challenges of the next 100+ years.
