Navigating Financial Risk: The Impact of Disasters on Supply-Demand Dynamics

Abstract

Financial Crisis and the Supply-Demand Model Risk is one of the most significant financial factors that people consider when making decisions on their savings and expenses. The video demonstrates the impact of disaster on financial risk that can affect families long after they have experienced disasters. Constant risks of facing financial losses from natural events such as the effects of Hurricane Katrina in 2005 in New Orleans makes people consider the potential protections that they can have from risk. During the disaster, thousands of people lost their homes from the floods and many were unable to successfully claim the benefits from insurers (Ferguson, 2018). Despite many people spending their income purchasing insurance, they failed to access the payments as a result of the scale of the disaster and the monetary implications it had on the real estate sector. Risks affect people in different ways that all amount to their inability to feed their families, access shelter, or have a decent living. Preparing and cushioning against risk is an issue that has developed over centuries and changed to accommodate the changing needs of the buyers of coverage. The demand and supply for insurance varies from one part of the world to another and affects access and prices of coverage. It has developed significantly over the years with variation on the contributions the state and the people make in premiums to facilitate benefits to the members of the public. During the 2005 natural disaster, the provision of insurance was based on the private terms implying that the market determined prices. After the disaster, the level of risk associated with the flooded parts of New Orleans increased and affected the supply of insurance to home owners. The destruction caused by the hurricane shed light on new evidence on the potential for destruction that natural disasters could have on homes in the region (Ferguson, 2018). With many insurance companies being reluctant to cover costs for potential disasters in the future, the supply for insurance for homeowners in the region has decreased and raised the prices. It...