Better insurance could effectively mitigate the increase in economic growth losses from US hurricanes under global warming

Global warming is likely to increase the proportion of intense hurricanes in the North Atlantic. Here, we analyze how this may affect economic growth. To this end, we introduce an event-based macroeconomic growth model that temporally resolves how growth depends on the heterogeneity of hurricane shocks. For the United States, we find that economic growth losses scale superlinearly with shock heterogeneity. We explain this by a dispro-portional increase of indirect losses with the magnitude of direct damage, which can lead to an incomplete recovery of the economy between consecutive intense landfall events. On the basis of two different methods to estimate the future frequency increase of intense hurricanes, we project annual growth losses to increase between 10 and 146% in a 2 degrees C world compared to the period 1980-2014. Our modeling suggests that higher insurance coverage can compensate for this climate change-induced increase in growth losses.

Automated summary

Global warming may increase the proportion of intense hurricanes in the North Atlantic. A study analyzes how this could impact economic growth using an event-based macroeconomic growth model. The study finds that economic growth losses in the United States increase disproportionately with the heterogeneity of hurricane shocks, which can hinder the economy's recovery between consecutive intense landfall events. By estimating the future frequency increase of intense hurricanes, the study projects annual growth losses to rise between 10 and 146% in a 2 degrees Celsius world compared to the period of 1980-2014. The modeling suggests that higher insurance coverage can offset these climate change-induced growth losses.