Costs of Natural Hazards



Efficiently reducing natural hazard risks requires a thorough understanding of the costs of natural hazards. Current methods to assess these costs employ a diversity of terminology and approaches for different types of natural hazards and impacted sectors. This may impede ascertaining comprehensive and comparable cost figures. Strengthening the role of cost assessments in the development of integrated natural hazard management requires determining the state of the art of cost assessment approaches, to highlight weaknesses and strengths of existing approaches, to facilitate their use and to identify possible knowledge gaps.

CONHAZ (Costs of Natural Hazards) aimed at compiling and synthesising current knowledge on cost assessment methods to strengthen the role of cost assessments in the development of integrated natural hazard management and adaptation planning. In order to achieve this, CONHAZ has adopted a comprehensive approach, considering natural hazards ranging from droughts, floods and coastal hazards to Alpine hazards, as well as different impacted sectors and cost types (direct tangible damages, losses due to business interruption, indirect damages, intangible effects, and the costs of risk mitigation).

Its specific objectives have been:

1) to compile the state-of-the-art methods for cost assessment;

2) to analyse and assess these methods in terms of technical aspects, as well as terminology, data quality and availability, and research gaps; and

3) to synthesise resulting knowledge into recommendations as well as to identify further research needs.

For each of the considered hazards (floods, droughts, coastal hazards and Alpine hazards) and cost categories (direct costs, business interruption costs, indirect costs, intangible costs and risk mitigation costs), a review of existing methods for cost assessment was carried out. These were based on literature reviews, four expert workshops (one in each hazard community), and a final synthesis conference. In the expert workshops, preliminary results of the reviews were presented to 20-30 experts and practitioners from each hazard community and discussed with them. The main purpose of these workshops was to ensure that the reviews cover all relevant methods but also to identify best-practices, as well as knowledge gaps. The final synthesis conference then brought together around 60 experts and practitioners from all the different hazard communities. It resulted in a common discussion of methods and knowledge gaps, together with a prioritisation of research needs.  

A selection of the main results of CONHAZ are the following:

The Policy brief #1: Costs of Natural Hazards - A synthesis. This policy brief summarises the main results of CONHAZ. These comprise findings regarding best practices, overall knowledge gaps and recommendations for practice and research as well as a vision on cost assessments of natural hazards and their integration in decision making.

Key recommendations are:

  • Cost assessments are often incomplete and biased. In order to obtain a complete picture of the costs of natural hazards, not only direct costs but also costs due to business interruption, indirect and intangible/non-market costs as well as the costs of risk mitigation should be considered.
  • Although improvements have been made over the last decades there are still high uncertainties in all parts of cost assessments. In any appraisal it is therefore important to identify the main sources of uncertainty at an early stage and try to reduce or handle them. Remaining uncertainties in cost estimates should be documented and communicated to decision makers.
  • One of the main sources of uncertainty in the ex-ante estimation of the costs of natural hazards is the lack of sufficient, comparable and reliable data. A framework for supporting data collection should be established at the European level, both for object-specific ex-post damage data (event analysis) and risk mitigation costs. Such a framework should ensure sufficient detailed information and minimum data quality standards to facilitate the development and consistency of European and national databases.
  • In general, there is a need for a better understanding of the damaging processes to model them appropriately. Regarding direct damages multi-parameter damage models are needed that better capture the variety of damage influencing parameters, also considering resistance parameters.
  • With regard to indirect costs more research is needed to understand and to model how markets function outside equilibrium and at different scales. Particularly this regards the dynamics of return to equilibrium after a hazardous event, the associated social and institutional interactions and how agent expectations are formed in situations of high uncertainty.
  • For intangible costs more research is needed especially on the physical impacts of natural hazards on the environment and human health.
  • With regard to the costs of risk mitigation special emphasis should be given to a better estimation of the costs of non-structural measures.
  • More research is needed on the effects of climate and socio-economic change on the future costs of natural hazards and costs of adaptation to these changes. At the same time, it remains vital to also determine how such findings can be integrated in cost assessment approaches. In this respect, the exchange of knowledge between the natural hazard risk community and the climate change community should be improved.
  • There is a need for appropriate tools and guidance as well as knowledge transfer to support decision makers with integrating cost assessment figures into their decision making process. Such tools or frameworks should communicate and consider uncertainties in cost figures and ensure the transparency of the decision rules.


Policy-brief #2: Costs of floods. This policy brief summarises the CONHAZ recommendations for conducting an appropriate flood loss assessment. It also provides some thoughts for a better management plan.

Policy-brief #3: Costs of droughts. This policy brief is aimed at helping policy makers and practitioners to distinguish between different types of drought costs and at providing them support in making a choice between the existing methods for assessing the costs of droughts. Moreover, the findings concerning drought mitigation and adaptation policies and knowledge gaps can help them identify strengths and weaknesses of current drought policies and needs for future research on the topic.


Helmholtz Centre for Environmental Research (UFZ) DE
University of Innsbruck (UIBK) AT
Société de Mathématique Appliquée aux Sciences Sociales (SMASH-CIRED) FR
Middlesex University, Flood Hazard Research Centre (MU) UK
German Research Centre for Geosciences (GFZ) DE
University of Ferrara (UniFe) IT
Institute of Environmental Science and Technology, Universitat Autònoma de Barcelona (UAB) ES
Institute for Environmental Studies, Vrije Universiteit Amsterdam (VU) NL