Being Prepared for the Next Disaster Pays Off, New Study Shows

Weather-related catastrophes are increasing in frequency and severity, and billion-dollar disasters are now the norm. In 2022 alone, the cost of natural disasters exceeded $360 billion across the globe, including more than 40 weather events causing over $1 billion in damage each.

With the cost of disaster growing, it's essential for government, businesses, and households to invest in resilience for communities to prosper.

According to a new economic study by Allstate, the U.S. Chamber of Commerce, and the U.S. Chamber of Commerce Foundation, every $1 spent on climate resilience and preparedness saves communities $13 in damages, cleanup costs, and economic impact.

Report

The Preparedness Payoff: The Economic Benefits of Investing in Climate Resilience

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Disaster Preparedness Pays Off    

The U.S. averages 10 natural disasters causing $1 billion or more worth of damage each year. The study found that every $1 spent on climate resilience and preparedness saves communities $13 in damages, cleanup costs, and economic impact. In fact, in the 25 natural disasters modeled—of varying severity and in different locations—it was found that, on average, each dollar of investment in disaster preparedness reduces a community’s overall economic costs by $7, after the event. Furthermore, it is generally accepted that $1 of upfront investment reduces the damage and cleanup costs of a natural disaster by $6.

Combining the two, shows that for every $1 invested in natural disaster resilience and preparedness, $13 can be realized in long-term economic savings, damage avoided, and cleanup costs saved after the event.

Here’s a closer look at some of the study’s top findings.

Breaking down the payoff: To get to this ratio, the study modeled 25 disaster scenarios ranging in damage and cleanup costs from $1 billion to $130 billion in communities across the country.

• Each model revealed substantial economic savings resulting from upfront investment in disaster resiliency programs and resources, preserving millions of jobs and household incomes, reducing the number of people displaced from their homes, and maintaining production to help local economies rebound faster.
• Every $1 spent on resilience saves communities an average of $7 on economic costs alone.  

The research makes clear that dollars spent on disaster preparedness and resilience are much more effective at reducing the cost of natural disasters than dollars spent on disaster recovery.

Disaster Prep Is a Good Idea in Large Cities, Small Towns, and Rural Areas

It’s critical to invest in disaster preparedness, whether for a sprawling metropolitan area or the smallest rural town. Those investments make a big difference for larger, more severe, and relatively small-scale disasters alike.  

For example:

• After investments in resilience and preparedness totaling $10.8 billion for a Category 4 Hurricane striking Miami, the area would prevent the loss of 184,000 jobs. The amount of production and income saved would be $26 billion and $17 billion, respectively.
• After $83 million of investments in resilience and preparedness for a major wildfire, Santa Fe would save 388 jobs, keep almost $45 million of output, and preserve more than $20 million of income in the area.

Resilience Investments Have Economic Benefits Even If a Disaster Never Occurs

Investments in resilience and preparedness are defenses against events that may not occur.

But even if a disaster doesn’t strike, communities can still benefit from the economic gains that come from preparedness investments. The more a community invests in disaster preparedness, the more jobs they’ll potentially create. That means the workforce grows, which then encourages more people move to or remain in the area. The end result is increased production and incomes.

If disasters do strike, areas that have invested in resilience and preparedness can preserve jobs and income that would have otherwise been lost. And the larger that upfront investment is, the greater the potential benefits that can be reaped. 

About the authors

Thaddeus Swanek

Thaddeus is a senior writer and editor with the U.S. Chamber of Commerce's strategic communications team.

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