According to Munich Re, the largest reinsurer worldwide, 2013 was the most expensive year in Germany in respect to losses caused by natural disasters.
However, an estimate of the costs of natural disasters often covers only the direct costs. And even these are presumed to be at least 50 per cent higher than quoted in international esti¬mates. Besides direct losses, indirect losses are also relevant.

The flooding in Thailand in 2011 resulted in the closure of many factories and damaged the car and electronics industries worldwide. However, improved precaution requires better knowledge of the total costs, which, besides losses, also cover the costs of risk reduction. These costing aspects of risk management have been investigated in a project funded by the European Union ”Costs of Natural Hazards“ (ConHaz).

An international team of scientists led by Dr. Heidi Kreibich from the German Research Centre for Geosciences - GFZ in Potsdam has now for the first time suggested an integrated cost assessment cycle in risk management.. Cost-benefit analyses which exclude certain cost categories result in suboptimal decision-making processes. For this reason, a dynamic cost assessment cycle for the costs relating to natural hazards and their management is required. This will enable rapid identification of inefficient risk management strategies and optimised adjustments.

Close linkage of the cost assessment and risk management cycles results in improved assessment of the total costs and consequently in a better basis for decision support in risk management. An efficient risk management which includes all costs for early warning systems, precautionary measures and disaster prevention will become more important with increasing losses caused by natural hazards in the course of climate and global change.

Literature references:
H. Kreibich, J. C. J. M. van den Bergh, L. M. Bouwer, P. Bubeck, P. Ciavola, C. Green, S. Hallegatte, I. Logar, V. Meyer, R. Schwarze and A. H. Thieken (2014): Commentary: Costing natural hazards, Nature Climate Change, Vol.4, 25.04.2014, pp. 303–306, doi:10.1038/nclimate2182