Gone with the Wind: Assessing Hurricane Costs in the Caribbean

IMF Blog, February 7, 2017

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Every year there are, on average, 12 storms that pass through the region, of which about half reach hurricane force winds (winds above 119 kilometers per hour).
Hurricanes are the leading cause of natural disasters in the Caribbean, making the region one of the most vulnerable in the world.
Only 62 percent of disasters caused by hurricanes have recorded data on economic damages, as the information is difficult to collect.

Damages in percent of GDP increase by about 3 percent with an increase in wind speed of 1 percent.

Between 1950 and 2014 hurricanes caused 238 natural disasters in the Caribbean.
The database recorded damages for 148 hurricanes, which caused roughly $52 billion (in 2010 constant U.S. dollars) in damages.
Recorded damages are equivalent to an average of 1.6 percent of GDP in damages every year in each island.
Estimated additional damages from the remaining disasters could have been about 0.9 percent of GDP every year.
Combining recorded and estimated unrecorded damages brings the average destruction of hurricanes to 2.5 percent of GDP a year.
A broader assumption—if all storms with hurricane strength winds that passed within 60 miles of the islands caused damages (a total of 335 storms including the 238 disasters)—yields an average island annual damage of 5.7 percent of GDP over the past 65 years.
Even the 2.5 percent figure might still underestimate costs due to under reporting in the 1950s and 1960s and restrictive disaster classification.

If temperatures were to increase by 4.3°C by 2100 (IPCC scenario RCP8.5), then average damages in the Caribbean would increase by about 34 percent as the frequency of the most intense storms would increase.
If temperatures were to increase only by about 3°C by the end of the century, which is close to what the November 2016 Paris Agreement on Climate Change would achieve without further target increases according to independent experts, the increase in damages would still be close to 24 percent.

Implement soft adaptation measures:
- Improved early warning systems.
- Better building codes.
Implement hard adaptation measures:
- Investments in resilient infrastructure.
Build fiscal buffers to cover the recurrent costs of disasters.
Use insurance to spread risks (for example, CCRIF).

Source: Gone with the Wind: Assessing Hurricane Costs in the Caribbean — Sebastian Acevedo, February 7, 2017.

Gone with the Wind: Estimating Hurricane and Climate Change Costs in the Caribbean
- Gone with the Wind: Estimating Hurricane and Climate Change Costs in the Caribbean (Markdown version)
- Gone with the Wind: Estimating Hurricane and Climate Change Costs in the Caribbean (PDF)
AR5 Synthesis Report - Climate Change 2014
- AR5 Synthesis Report - Climate Change 2014 (Markdown version)
- AR5 Synthesis Report - Climate Change 2014 (PDF)