Template-Type: ReDIF-Paper 1.0
Author-Name: Goetz von Peter
Author-X-Name-First: Goetz
Author-X-Name-Last: von Peter
Author-Name: Sebastian von Dahlen
Author-X-Name-First: Sebastian
Author-X-Name-Last: von Dahlen
Author-Name: Sweta C Saxena
Author-X-Name-First: Sweta
Author-X-Name-Last: C Saxena
Title: Unmitigated disasters? Risk-sharing and macroeconomic recovery in a large international panel
Abstract: This paper examines the patterns of macroeconomic recovery following natural disasters. In a panel with global coverage from 1960 to 2011, we make use of insurer-assessed losses to estimate growth responses conditional on risk transfer. We find that major disasters reduce growth by 1 to 2 percentage points on impact, and over time produce an output cost of 2% to 4% of GDP, on top of the initial damage to property and infrastructure. Akin to wars and financial crises, natural disasters have permanent effects, in the sense that output losses are not fully recovered over time. But it is the uninsured losses that drive the macroeconomic cost; insured losses are less consequential in the aggregate, and can even stimulate growth. By helping to finance the recovery, insurance mitigates the macroeconomic cost of disasters. Many countries lack the capacity to (re)insure themselves and would stand to benefit from international risk sharing. 
Creation-Date: 2024-03
File-URL: https://www.bis.org/publ/work1175.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1175.htm
File-Format: text/html
Number: 1175
Keywords: natural disasters, growth, recovery, risk transfer, reinsurance, development
Classification-JEL: G22, O11, O44, Q54
Handle: RePEc:bis:biswps:1175