Nasty Natural Disasters: Billions of Dollars to Recover

Nov. 6, 2007 Special to ABCNEWS.com — -- The Santa Ana winds have died down and firefighters have tamed the San Diego fires that erupted last week. But what looks to be spiraling are the federal outlays needed to return displaced homeowners to the area and rebuild damaged infrastructure.

To fight the fire alone, the bill, according to the Federal Emergency Management Agency (FEMA), could total $100 million. Officials in San Diego estimate the overall damage to the county will be over $1 billion.

It goes to show that the recovery process from such extreme natural devastation is not a quick one. Nor is it cheap.

Click here to see America's most expensive natural disasters at our partner site, Forbes.com.

Consider the cleanup still taking place along the Gulf Coast and in the city of New Orleans. So far the government has spent $31.3 billion in present-value dollars on humanitarian aid, infrastructure repair and funding for destroyed private property. The flooding damage and property destruction caused by Hurricane Katrina makes it by far the most expensive natural disaster since FEMA was founded in 1979.

For many Americans glued to their TVs during this tragedy, the question might have been: Are their any places in the U.S. that are safe from such debilitating natural disasters?

The answer? No. Americans have been exposed to almost every natural hazard imaginable, except for events like typhoons that can only occur in the Southern Hemisphere.

While the Loma Prieta and Northridge earthquakes that struck California in the late '80s and mid-'90s caused significant damage, you'll notice the list of the most expensive disasters is otherwise populated with hurricanes.

Behind The Numbers

This means FEMA will not likely pay out much to repair homes lost in the San Diego fires, since homeowners will largely be able to rely on their insurance policies instead.

Where the agency kicks in for residents affected by natural disasters is beyond what insurance will pay for--to a limit of $28,200. This means more money to hurricane-damaged areas where homeowners might not have flood insurance policies to fall back on.

"FEMA is designed to get people back on their feet," says Aaron Walker, a spokesman for FEMA. "It's not designed to make people whole."

In 2005, Florida residents displaced by Hurricane Rita required a $4 billion government bailout. A year earlier, Hurricane Ivan caused $2.6 billion in damage in parts of Florida, Louisiana and Texas.

Preventive Measures

From a monetary standpoint, the wind and flooding associated with hurricanes cause more damage than any other natural force. And the damage is often greatest in hurricane-prone parts of the country, such as Mississippi and Louisiana, where building standards for structural integrity are lower. Officials in Florida say that the state's higher building code standards lessen damage to the Sunshine State during hurricanes--and decreases the amount of federal assistance that's needed there.

"The federal government should require that people build structures that are safer," says Florida Insurance Commissioner Kevin McCarty. He also points out that Florida requires homes and commercial buildings to meet higher durability standards than other states along the Gulf Coast, though it costs Florida more and makes federal relief costs lower in Florida, on the margins. "If building codes are tied to federal grants, it will give states an incentive."

A more front-foot approach to disaster management would also make insurance premiums lower, says Jim Hurley, a spokesman for the Texas Insurance Department, a state organization for insurance agents and consumers.

"Reinsurance is a huge driver of cost," he says, "and it costs more to insure a home after catastrophic loss."

Avoiding catastrophic loss is key even beyond the boost in insurance premiums. For example, the California Seismic Safety Commission notes that while seismically retrofitting a house can cost be costly, making repairs following a significant earthquake can total more than the home's equity.

There's no way to qualify which is worse when it comes to destruction, but both hurricanes and earthquakes cause extreme financial devastation. Preventative measures can significantly mitigate damage and reduce an area's reliance on insurance and FEMA, which may be the safest bet of all.