White Paper

Hurricane Katrina: Is the US Prepared to Deal With the Aftermath of Increasingly Severe Storms?

XL Catlin and the Cambridge Centre for Risk Studies determine the pace of economic, social and cultural recovery in the aftermath of disasters.

White Paper Summary

The storms such as Rita and Wilma that ensued made the negative effects pronounced. While at the national level, the impacts on GDP and unemployment were short-lived, their regional and local socioeconomic impacts were found to be very significant. The hurricane trio had a wide-range of effects on the energy sector, housing, infrastructure, construction and, travel and tourism sectors in the Gulf states of the USA. Interestingly, the stock market had barely moved after the storms but the first CAT bond was triggered after Katrina. In addition to the impacts on the economy, several structural issues that were impediments to quick economic recovery were identified. The storms revealed several fundamental flaws in the management of hurricanes characterized by inept disaster response and inefficiencies in administration of aid after Katrina. The over-reliance on ex-post measures like federal disaster aid and the misuse of appropriated funds by aid recipients only slowed the recovery process further. Finally, inadequate risk differentiation of hazard zones, mispricing of risks in coastal areas, lack of enforcement in the purchase of mandatory insurance and lack of incentives for improving private insurance uptake were identified as some of the fundamental problems plaguing the US, those of which warrant immediate attention.


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AXA XL, the property & casualty and specialty risk division of AXA, provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward. To learn more, visit www.axaxl.com.

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The R&I Editorial Team can be reached at [email protected]