The Tragedy of Florida and Another Natural Disaster

As we all watch the tragedy taking place in Florida and soon to be in other parts of the SE USA, we are saddened by the lost of lives along with the devastation and the impact on peoples lives like for months and maybe years to come.  

If you think in the US we are constantly seeing the daily news dominated by natural disasters, you would be correct.  In 2021, the US had over 20 $1 Billion dollars or more weather related natural disasters with economic losses that totaled $1 billion last year with a total cost of about $145 billion in economic damage. 

This is not unique, but a trend.  

At the beginning of 2020 I pup together a presentation for adult education and other venues entitled "Long Term Trends Which May Affect Your Financial Future or the New Normal".  The presentation included seven trends which I believe currently and will continually affect our financial futures.  

The two comments I heard most often were very interesting and informative along with depressing.  

One of the trends I identified is "The Increasing Costs of Natural Disasters".   When I put together the presentation, I used data thru 2019.  Following is a summary of costs of natural disasters by decade.

• In the 1980s the total economic cost of disasters was $127.7 Billion with 28 Billion dollar or more events.  
• In the 1990s the total economic cost of disasters was $269.6 Billion with 52 Billion dollar or more events.  
• From 2000-2009 the total economic cost of disasters was $510.3 Billion with 59 Billion dollar or more events.  
• From 2010-2019 the total economic cost of disasters was $802.2 Billion with 119 Billion dollar or more events.

I am not optimistic for this decade.  In fact, I would be totally shocked if this decade does not again set a new record.  
                
And there are and will continue to be consequences, not just for the people tragically affected directly, but all of us.  Some of these consequences are:

• Increasing cost of property/casualty insurance.  This includes higher deductibles and premiums.  How much is your house worth if you cannot obtain homeowners insurance or the cost of homeowners insurance doubles or triples?  Homeowners in parts of the country are already finding this out. 
• Loss of personal wealth.  This can take several components.  Insurance only covers so much and losses not covered by insurance are either funded by the owner in the form of cash or debt.  If owners do not have the cash or the ability to payoff debt, then they will not repair and in many cases simply walk away. In any case, their personal net worth declines.
• Increasing local, state and federal expenditures.
• Factoring natural disasters and climate change into long-term mortgages may increase both the cost of mortgages and their availability.  How much is residence in a high risk area if potential buyers cannot get a mortgage or the cost of the mortgage factors in the risk of a natural disaster?  In November, 2019 the Federal Reserve Bank of San Francisco stated:  "30-year mortgage currently does not price in climate risk...  Climate Change could end mortgages as we know them”. 

What can you do.  Too often I have heard individuals say that there is nothing they can do or that's just mother nature.  That's not true.  

1. There is a lot you can do and it starts with only supporting local, state or National candidates who do not accept the science behind climate change.  These politicians are dangerous and expensive not just to you, but even more importantly to your children and grandchildren.
2. Mother nature has always had the ability to be destructive, but if mother nature's increased vehemence is due to climate change, then we can no longer wait to address this as a society.   The science and research behind the increasing intensity of natural disasters is overwhelming.  The costs to our society as outlined above are also overwhelming.  

We have the technology and scientific intelligence to combat the cost of natural disasters on a long-term basis.  We simply have to support them, financially and politically.  

The increasing costs and intensity of natural disasters is not depressing.  It just is what it is.  What is depressing is citizens and political leaders who refuse to address the problem and work on long-term solutions.  

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.