Billion-Dollar Disasters Are More Frequent Than Ever in the US—Wildfires Are Only Part of That Toll

Wildfires in the West will have an enormous financial toll, but they are part of a more worrying trend of huge financial losses tied to extreme weather events caused by climate change.

The fires consuming the American West are also damaging a regional economy under attack by the coronavirus outbreak. And they aren’t alone. Major weather-related events have been increasing across the United States over the past four decades, according to the National Oceanic and Atmospheric Administration (NOAA), and are taking an increasingly large financial toll on the nation. 

In the West, wildfires are destroying property, running up huge losses for property insurers, and putting a strain on economic activity that could linger for a year or more. The credit rating agency A.M. Best estimates that insured losses from the blazes in California could top the unprecedented $13 billion recorded in 2017 when the state was hit by three of the five costliest fires in US history. 

The costs associated with this year’s wildfires are only the latest instance of weather events linked to climate change taking a huge financial toll on the country. Since 1980, the United States has experienced a sharp increase in billion-dollar weather events, according to the NOAA and researcher Adam B. Smith. These events were adjusted for inflation in the studies, and refer to any weather-caused event that totaled at least $1 billion in property damage and economic losses.

In the 1980s, these events happened nearly three times per year, on average. In the 2010s, they were occurring an average of nearly 12 times per year—a 400% increase over 40 years.

“These billion-dollar disaster events are becoming an increasingly larger percentage” of the overall damage from all weather events in the United States every year, the report states. In 2019 alone, 14 events crossed the $1 billion threshold, including extensive flooding along the Mississippi, Arkansas, and Missouri Rivers, tornado outbreaks, hail storms, tropical storms, and wildfires. These events have affected nearly every region of the United States.

Prior to Hurricane Laura and the wildfires, 2020 had already seen a huge spate of severe storm systems—including the derecho that swept through Iowa this summer. These alone have caused 10 billion-dollar weather events, with peak hurricane season upon the US and winter storms on the horizon. 

Additionally, the wildfires in the Western United States are still not under control, and the extent of the economic losses cannot yet be tallied.

“We know that the damage is widespread, but we don’t really know how many homes, how many structures have been destroyed,” said Adam Kamins, an economist who tracks natural disasters for Moody’s Analytics. “I imagine the number is going to be an unbearably high one.”

The economic pain will be intense in areas decimated by fire, especially towns in rural Oregon and California where the pandemic-induced recession is already taking a severe toll. Fire wiped out much of the small community of Phoenix, in southern Oregon, including downtown businesses like La Tapatia, a Mexican restaurant opened in 1992. “Good places like our own La Tapatia, but so many other family run businesses, [were] destroyed by the massive fire,” its owners informed patrons in a Facebook post, adding there was “lots to do” but they hoped to someday reopen. 

The smoke from the fires has even had an impact on businesses in major cities like San Francisco, which was spared a direct hit from the wildfires. As air quality plummeted, the ability to offer outdoor seating took a hit. For many restaurants these outdoor tables have provided a financial lifeline under pandemic seating restrictions. The fires have caused that toll to be further exacerbated.

Wildfires once did little economic damage because they occurred in remote forests. But Americans increasingly have moved into what was once wilderness, leaving themselves, and their homes and businesses more vulnerable. Even without direct hits on major metropolitan areas, climate change-related weather events can exact a huge economic toll.

Looking back at Hurricane Laura just last month, Louisiana’s agricultural industry—including farming and timber production—was devastated. In fact, experts at Louisiana State University (LSU) believe that its toll—$1.6 billion—has already exceeded the agricultural losses associated with Hurricanes Katrina and Rita, which hit the state in 2005. 

While studies have shown that recovery phases from these kinds of mega-disasters can provide a temporary economic boost, the effects are short lived and—over time—end. In 2014, Max Nielsen-Pincus, chair of the environmental science and management department at Portland State University, and researchers from the University of Oregon and the US Forest Service found that fires actually generated short-term economic gains in small communities.

However, by the following spring, affected economies typically lost momentum and fell into a period of slower growth that could last up to 18 months. Tourism could suffer because “visitors may not want to return fearing a blackened landscape,” according to the paper published in the journal Forest Policy and Economics. And economic activity such as logging can be wiped out.

“Urban areas like the suburbs of Portland—they’ll probably recover pretty quickly,” Nielsen-Pincus said in an interview. “But these rural communities that are impacted by nearby fires—this could be a drag on their economy that lasts months or years.”