Hurricane Fatalities and Hurricane Damages: Are Safer Hurricanes More Damaging?

Abstract

The rising cost of hurricanes and other natural hazards has been a concern to policy makers and insurance industry executives. We offer a heretofore overlooked explanation for rising hurricane damages—the reduction in fatalities from hurricanes. Improved hurricane forecasts, more extensive evacuations, and other improvements make hurricanes less lethal, reducing the full cost of living on hurricane‐prone coasts, and should paradoxically increase damages. We confirm this prediction by analyzing land‐falling hurricanes in the mainland United States between 1940 and 1999. We first estimate a time‐varying measure of hurricane lethality and then show that this measure significantly affects damages in hurricane‐prone coastal areas.