Global-Scale Assessment of Economic Losses Caused by Flood-Related Business Interruption

Abstract

Estimating river flood risk helps us to develop strategies for reducing the economic losses and making a resilient society. Flood-related economic losses can be categorized as direct asset damage, opportunity losses because of business interruption (BI loss), and high-order propagation effects on global trade networks. Biases in meteorological data obtained from climate models hinder the estimation of BI loss because of inaccurate input data including inundation extent and period. In this study, we estimated BI loss and asset damage using a global river and inundation model driven by a recently developed bias-corrected meteorological forcing scheme. The results from the bias-corrected forcing scheme showed an estimated global BI loss and asset damage of USD 26.9 and 130.9 billion (2005 purchase power party, PPP) (1960–2013 average), respectively. Although some regional differences were detected, the estimated BI loss was similar in magnitude to reported historical flood losses. BI loss tended to be greater in river basins with mild slopes such as the Amazon, which has a long inundation period. Future flood risk projection using the same framework under Representative Concentration Pathway 8.5 (RCP8.5) and Shared Socioeconomic Pathway 3 (SSP3) scenarios showed increases in BI loss and asset damage per GDP by 0.32% and 1.78% (2061–2090 average) compared with a past period (1971–2000 average), respectively.