Nepal earthquake rocks its economy
Last month's massive earthquake in Nepal killed thousands of people, leveled hundreds of thousands of homes and businesses, and devastated the nation's infrastructure.
What might that all add up to? Data from one group of analysts suggests that the Nepal disaster has set back the nation's economy for years to come. A new report from multinational insurance giant Aon (AON) shows preliminary economic losses from the Nepal earthquake likely to reach and possibly exceed $5 billion. That would equal at least 25 percent of Nepal's GDP.
And Singapore-based Channel NewsAsia, quoting documents from the International Monetary Fund, says the IMF expects the Nepalese economy to "decelerate" in the short term as the nation deals with the loss of essential revenue from tourism and absorbs higher costs for imported goods.
Analysts are also gritting their teeth as they tally up the damage.
Rajiv Biswas, an Asia-Pacific economist with IHS, projects that preliminary reconstruction costs in Nepal could climb above $5 billion. "It's been devastating," Biswas told The Irish Times. "Their tourism economy has obviously come to a halt. I don't know when it would be realistic for tourists to again visit Nepal."
According to the Insurance Information Institute (III), the costliest earthquake was the 2011 disaster in Japan, which triggered devastating tsunamis along that nation's northeastern coastline, killing close to 16,000 people. It also caused $210 billion in overall damages and around $40 billion in insured damages.
The III also noted that Nepal is one of the world's poorest nations, with little recourse when it comes to insurance. It estimates that less than $3.50 is spent per capita annually in Nepal on property and casualty insurance, versus the nearly $2,300 spent each year in the U.S.
But III chief economist Steven Weisbart told CBS MoneyWatch that underdeveloped countries have ways to increase their overall insurance coverage that can cushion, if not fully protect, their economies against future natural disasters. He pointed to how Haiti used its membership in the Caribbean Catastrophe Risk Insurance Facility developed by the World Bank to tap those funds to help it recover from the devastating 2010 earthquake there.
That pooled insurance fund, Weisbart said, allowed Haiti to be compensated not on the dollar value of any damaged property but instead on "what's called a 'parametric' form of compensation -- where essentially the severity of the earthquake is what triggers a certain amount of money that gets paid."
The Nepal earthquake comes as scientists warn that nearly half of U.S. residents living in the Lower 48 states are at risk of "potentially damaging ground shaking from earthquakes." As many as 28 million Americans are likely to experience "strong shaking" during their lifetimes. The U.S. Geological Survey also reported recently that the chance of a major 8.0 earthquake in California over the next 30 years has increased from around 4.7 percent to 7 percent.
Despite those rising odds, an III survey last year found that only 7 percent of homeowners across the U.S. -- and only 12 percent in California -- had an earthquake insurance policy.