Economic Anatomy of a Disaster: Hurricane Katrina

Slide 1:Economic Anatomy of a Disaster: Hurricane Katrina

Slide 2:Questions we strive to answer

What is the pattern of short-term economic effects on the areas surrounding the disaster? How far do the economic effects ripple in the US economy? What long-term effects will be felt by Katrina in the most damaged areas, if any? Do disasters like Katrina have a long-term effect on our perception of risk for future disasters?

Slide 3:Short-term Impact

Complete dispersion of the population to other regions from the hardest hit parishes. Recovery Expenses actually give a windfall profit to surrounding areas as reporters, non-profit aide workers and insurance claim money surges into the area while residents compete for space. -In an article for the Washington Post by Jodie Allen August 30, 1992 quotes Researcher Mary Graham, research director at the Charleston-Trident Chamber of Commerce �attributed much of the 18-month economic surge in South Carolina�s economy that followed the devastating 1989 hurricane Hugo to �insurance dollars that poured into the economy -In an article for the Washington Post by Jodie Allen August 30, 1992 quotes Researcher Mary Graham, research director at the Charleston-Trident Chamber of Commerce �attributed much of the 18-month economic surge in South Carolina�s economy that followed the devastating 1989 hurricane Hugo to �insurance dollars that poured into the economy

Slide 4:Short -term Impact

Residents scattered throughout surrounding parishes that were not as damaged People scattered farther than just out of their parishes The question remains will they return? From Local Area Personal Income for 2005 - By David Lenze This gives you an idea of the amount that wage and salaries increased due to the influx of the population and this gives us an idea of where the economic value was displaced after the hurricanes. There is a �adjustment to proprietors� income now includes a �recovery surge� in Mississippi and Louisiana� however, in St. Bernard parish there was a 80% decline in personal income �Most residents of St. Bernard Parish have not returned�From Local Area Personal Income for 2005 - By David Lenze This gives you an idea of the amount that wage and salaries increased due to the influx of the population and this gives us an idea of where the economic value was displaced after the hurricanes. There is a �adjustment to proprietors� income now includes a �recovery surge� in Mississippi and Louisiana� however, in St. Bernard parish there was a 80% decline in personal income �Most residents of St. Bernard Parish have not returned�

Slide 5:Who gets hurt the most

Ex: St. Bernard Parish - hardest hit areas Decrease in the number of available Jobs for permanent residents Decrease in pay for those Jobs available Increased dividend and interest income for the area as a percentage of Income

Slide 6:Who gets hurt the most?

Unskilled laborers with little savings. People who didn�t have the means to get out. People at the bottom of the income bracket. Find out what the last quartile of income is or was for St. Bernard Parish and New Orleans.Find out what the last quartile of income is or was for St. Bernard Parish and New Orleans.

Slide 7:Did Katrina cause an overall US economic slowdown?

Housing starts continued to increase in the US and building prices increased as materials were diverted to the devastated areas However, largely the US economy continued its growth after Katrina and the effect of the Storm did not cause a downturn

Slide 8:Possible Long-term Impact

Will the most severely damaged parishes recover with time? Will the unskilled labor force return? Will the surrounding areas be affected in a positive way?

Slide 9:Comparison Study: Hurricane Andrew

Hardest hit area: Homestead, FL Surrounding areas that benefited: Miami, Ft. Lauderdale People hardest hit: unskilled laborers, migrant farmers Did the economy of Homestead ever recover? Hurricane Andrew hit the city of Homestead, FL on August 23rd 1992 A huge amount of people moved to Ft. Lauderdale into Broward County. Hurricane Andrew hit the city of Homestead, FL on August 23rd 1992 A huge amount of people moved to Ft. Lauderdale into Broward County.

Slide 10:Homestead, FL 2007

Census Figures fell between 1990 and 2000 Most of the original population never returned by 2000 The surrounding economies felt a recovery boom after Hurricane Andrew Since 2000 the population has begun to grow as Miami crowds people back into Homestead. Population in 1990 census figures 5880 in 2000 the census dropped by 366 people The population shift is more towards Minorities Mexican, Cubans, etc. Babies by-product of Hurricane Andrew FORT LAUDERDALE -- Broward Country is in the midst of a baby boom nine months after Hurricane Andrew. Around the county, many hospitals are reporting a surge in births in May. While some of the boom stems from the area's expected population growth, many of the extra births are to families who have moved from hard-hit Dade County. History tells us to expect increases in conceptions during major disasters, said Dr. Mark Grenitz, a Plantation obstetrician."Major snowstorms, blackouts, anything that shuts business down. If you're stuck at home and there's nothing else to do, these kind of things do happen. The Ottawa Citizen May 29, 1993, Saturday, FINAL EDITION Population in 1990 census figures 5880 in 2000 the census dropped by 366 people The population shift is more towards Minorities Mexican, Cubans, etc. Babies by-product of Hurricane Andrew FORT LAUDERDALE -- Broward Country is in the midst of a baby boom nine months after Hurricane Andrew. Around the county, many hospitals are reporting a surge in births in May. While some of the boom stems from the area's expected population growth, many of the extra births are to families who have moved from hard-hit Dade County. History tells us to expect increases in conceptions during major disasters, said Dr. Mark Grenitz, a Plantation obstetrician."Major snowstorms, blackouts, anything that shuts business down. If you're stuck at home and there's nothing else to do, these kind of things do happen. The Ottawa Citizen May 29, 1993, Saturday, FINAL EDITION

Slide 11:Longterm Economic Impact on St. Bernard Parish

Most of the unskilled labor population won�t return The area�s economy will disperse and assimilate to surrounding areas As space runs out in New Orleans St. Bernard may be rebuilt after more than a decade. Ft. Lauderdale thing hereFt. Lauderdale thing here

Slide 12:Do we become more Resilient after disasters occur?

Building codes become more strict after disasters occur Insurers reassess their losses due to MegaCat disasters like Katrina and premiums rise accordingly Underwriting becomes stricter and more accurate in times immediately following disasters

Slide 13:Do we become more Resilient after disasters occur?

Hurricane risk in the areas remains the same People rebuild when the memory of a tragedy is forgotten. Even insurance companies lower premiums once markets calm and competition for business resumes "Today, many experts believe insured property damage could have tripled to nearly $50 billion had Andrew struck a more densely populated area such as Miami or Fort Lauderdale," A M Best noted. Insurance Industry International May 1996 Waste News November 7, 2005 Fla. regains footing post-Wilma Life is returning to normal in Florida for workers at Republic Services Inc. as they rebound from the latest in a string of devastating hurricanes that have blasted the South. Corporate headquarters for the nation's third-largest solid waste management company in Fort Lauderdale were closed for about a week following Hurricane Wilma's arrival Oct. 24. The company's offices, on the 27th and 28th floors of the 110 Tower, did not sustain damage because the structure was constructed according to higher building standards enacted following Hurricane Andrew in 1992. But they remained out of commission for days due to a lack of power and water, company spokesman Will Flower said last week. Engineering News-Record November 7, 2005 Investigators Find Wilma Damage Passes Expectations Hector Lima, director of Miami's building department, would not speculate about cause. But says the newer buildings with losses got building permits before wind resistance codes were raised to 146 mph from 110 mph in 2002. Saffir says the damages raise questions about design, workmanship and code enforcement. "Some local city building departments may not have enforced the code as rigorously as they could have," he says. He points out that two high-rises in Coral Gables withstood the storm, while a neighboring building lost 80% of its windows. The 14-story glass curtain wall of a new U.S. courthouse in Miami was also pelted by debris, but lost only one ground-floor window hit by equipment, says Gene Budler, vice president of operations for Dick Corp., Pittsburgh. The company is finishing construction on the courthouse now. The Economist June 18, 2005 U.S. Edition Taking cover; Property insurance You may still worry about Aunt Tilly in Fort Lauderdale, but should anyone shed a tear for America's insurers? No: the property-and-casualty (P&C) insurance industry looks impressively fit, given last year's record $27.3 billion in insured natural-disaster losses, of which 83% were hurricane-related. The P&C industry "has just experienced its most remarkable recovery in recent history," says Robert Hartwig of the Insurance Information Institute (III), an industry group. The sector produced an underwriting profit of $5 billion in 2004, its first since 1978. Given the improving picture, average premiums are expected to flatten or even decline. The turnaround did not happen overnight. Throughout the 1990s, increasingly severe losses (Hurricane Andrew, the Northridge earthquake, tornadoes, wildfires and such) squeezed insurers. Then came the terrorist attacks of 2001. Between 1990 and 2002, says the III, home insurers paid out $1.17 in losses and expenses for every dollar of premiums. Since then, the sector has gradually raised prices and has shown more underwriting discipline. By 2003, payouts had fallen to $0.98 per dollar of premiums, though last year's storms pushed payouts back up to $1.01. The lacklustre investment climate in recent years has encouraged this greater discipline, since investments are no longer guaranteed to top up results. The Gazette (Montreal, Quebec) September 26, 1992, Saturday, FINAL EDITION Hurricane's silver lining: slum housing is gone with the wind The other positive aspect of the storm is the fact that slum- housing areas south of Miami (and there are plenty of them) are no more. This may sound harsh, but Andrew did in minutes what governments at various levels have never been able to do - eliminate the slum housing and migrant-worker camps. Life has obviously been no picnic for those who lost what little they had. But in the days since Andrew swept through they have had better accommodation, food and health-care service than they've probably ever had. And, when the region is rebuilt, the housing certainly won't be any worse than what was there and will probably be a lot better. "Today, many experts believe insured property damage could have tripled to nearly $50 billion had Andrew struck a more densely populated area such as Miami or Fort Lauderdale," A M Best noted. Insurance Industry International May 1996 Waste News November 7, 2005 Fla. regains footing post-Wilma Life is returning to normal in Florida for workers at Republic Services Inc. as they rebound from the latest in a string of devastating hurricanes that have blasted the South. Corporate headquarters for the nation's third-largest solid waste management company in Fort Lauderdale were closed for about a week following Hurricane Wilma's arrival Oct. 24. The company's offices, on the 27th and 28th floors of the 110 Tower, did not sustain damage because the structure was constructed according to higher building standards enacted following Hurricane Andrew in 1992. But they remained out of commission for days due to a lack of power and water, company spokesman Will Flower said last week. Engineering News-Record November 7, 2005 Investigators Find Wilma Damage Passes Expectations Hector Lima, director of Miami's building department, would not speculate about cause. But says the newer buildings with losses got building permits before wind resistance codes were raised to 146 mph from 110 mph in 2002. Saffir says the damages raise questions about design, workmanship and code enforcement. "Some local city building departments may not have enforced the code as rigorously as they could have," he says. He points out that two high-rises in Coral Gables withstood the storm, while a neighboring building lost 80% of its windows. The 14-story glass curtain wall of a new U.S. courthouse in Miami was also pelted by debris, but lost only one ground-floor window hit by equipment, says Gene Budler, vice president of operations for Dick Corp., Pittsburgh. The company is finishing construction on the courthouse now. The Economist June 18, 2005 U.S. Edition Taking cover; Property insurance You may still worry about Aunt Tilly in Fort Lauderdale, but should anyone shed a tear for America's insurers? No: the property-and-casualty (P&C) insurance industry looks impressively fit, given last year's record $27.3 billion in insured natural-disaster losses, of which 83% were hurricane-related. The P&C industry "has just experienced its most remarkable recovery in recent history," says Robert Hartwig of the Insurance Information Institute (III), an industry group. The sector produced an underwriting profit of $5 billion in 2004, its first since 1978. Given the improving picture, average premiums are expected to flatten or even decline. The turnaround did not happen overnight. Throughout the 1990s, increasingly severe losses (Hurricane Andrew, the Northridge earthquake, tornadoes, wildfires and such) squeezed insurers. Then came the terrorist attacks of 2001. Between 1990 and 2002, says the III, home insurers paid out $1.17 in losses and expenses for every dollar of premiums. Since then, the sector has gradually raised prices and has shown more underwriting discipline. By 2003, payouts had fallen to $0.98 per dollar of premiums, though last year's storms pushed payouts back up to $1.01. The lacklustre investment climate in recent years has encouraged this greater discipline, since investments are no longer guaranteed to top up results. The Gazette (Montreal, Quebec) September 26, 1992, Saturday, FINAL EDITION Hurricane's silver lining: slum housing is gone with the wind The other positive aspect of the storm is the fact that slum- housing areas south of Miami (and there are plenty of them) are no more. This may sound harsh, but Andrew did in minutes what governments at various levels have never been able to do - eliminate the slum housing and migrant-worker camps. Life has obviously been no picnic for those who lost what little they had. But in the days since Andrew swept through they have had better accommodation, food and health-care service than they've probably ever had. And, when the region is rebuilt, the housing certainly won't be any worse than what was there and will probably be a lot better.

Slide 14:Anatomy of a Disaster