As a follow-up to our August 5th post, “Climate disasters devastating to small businesses” <Link>, we’re sharing this research about disaster clustering. The article is worth considering by animal health pros with significant fiduciary responsibilities or those who lead expansion decisions into new geographies.
The authors share the way in which overlapping natural disaster systems interact is a major area of study in environmental science, but has received comparatively little attention in economics literature. Examining these potential interactions would likely be important for financial institutions, since such assessments would, in many instances, increase the estimated financial impact of a given natural disaster. Clustering in natural disaster occurrences is defined as the tendency for natural disasters to be concentrated in certain geographic regions and/or short periods of time.
Source: Liberty Street Economics, September 2, 2025. Link.
INSIGHTS: You may find the comments about drought interesting. “Droughts are the ninth-most severe hazard type when using county-level data, but are the second-most severe hazard type when aggregating damages to the cluster level, possibly because the average drought occurs in a cluster of about thirty counties, relative to an average cluster size of four counties across all hazard types.”