New REACHOUT paper! Fast and Clear Compensation Enhances Company Resilience to Natural Disasters

Companies affected by natural disasters recover more quickly when they have a loyal customer base and clear, straightforward compensation processes. This is a key finding from new REACHOUT research conducted by the Institute for Environmental Studies (IVM) of VU Amsterdam, published in Water Resource and Economics.

In collaboration with Deltares and Delft University of Technology, VU Amsterdam distributed a questionnaire in the area flooded during the summer of 2021 in the Netherlands. More than two hundred small and medium-sized enterprises in and around the flooded area participated in the survey.

The research revealed that companies with a substantial number of local customers experienced less loss of turnover during temporary closures compared to those with a weaker local customer base. “This is similar to what we observed during the COVID-19 pandemic,” explains lead researcher Thijs Endendijk. “Local consumers support businesses in their neighborhood when they cannot open for extended periods, making these businesses more resilient.”

Insurers’ actions also significantly influence economic recovery. Companies that received expected compensation promptly were able to reopen earlier than those that did not. “This may be due to faster repair of damage, but also because companies might seek alternative solutions if they no longer anticipate further compensation,” said VU professor Wouter Botzen. “This underscores the importance of a clear and streamlined compensation process after disasters in the Netherlands.

Economic Impact and Compensation

The 2021 flood in the Netherlands caused estimated damages of between 400 and 500 million euros, most heavily affecting the retail, hospitality, and agricultural sectors. Insurers, the government, and disaster funds have compensated more than 60 percent of all losses, covering both repair costs and lost revenues.

Financial losses from turnover often exceeded those from physical damage to buildings, materials, and stock. On average, companies remained closed for two weeks, with some shutting down for several months. Each day a company is closed costs an average of 0.5 percent of its annual revenue, equating to approximately 5,500 euros per day for a typical small to medium-sized enterprise. The average loss of turnover for companies affected by the flood was 68,500 euros. Even companies not directly flooded but located nearby incurred an average turnover loss of 12,000 euros due to temporary inaccessibility to employees, customers, or suppliers.

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The climate story of Gdynia​

Short summary: A story about Jan and Maria during extreme precipitation.

Theme: Flooding

End user: Citizens

Link to the story: under construction