How much does it cost to do nothing?

What if investing in disaster risk reduction (DRR) could not only reduce disaster losses but also help limit pressure on public finances?

DRR must become part of the political economy worldwide. We urgently need a paradigm shift: prevention and resilience should not be seen as costs, but as investments. Effective investments can attract public and private finance because they deliver long-term returns.

Ultimately, the three pillars of sustainability – social, economic and environmental – all depend on reducing disaster risk.

Yet we have not managed to convince citizens, stakeholders, decision-makers and governments to take proactive action, even when the case is framed in terms of ethical responsibility, social duty, and saving lives and communities.

We need to change the narrative. Alongside the unacceptable social and environmental impacts of disasters, we must emphasize their often hidden economic costs: the direct and indirect losses that societies pay year after year.

The seismic mortgage and the interest bill we keep paying

The recent earthquake-related tragedies in Venezuela ,  Colombia and  Indonesia  bring us back to images and experiences we have seen before. It feels like a sad déjà vu.

Earthquakes are natural phenomena, but disasters occur when hazards interact with exposure, vulnerability and capacity. Structural deficiencies in buildings, inadequate design and construction practices are often “genetic” defects due to the lack of knowledge at the time of constructions or lack of enforcement of code provisions. Together with outdated or incomplete seismic hazard information they can all contribute to disaster risk.

We speak of “lessons learned after earthquakes”, “prevention” and “making buildings safe”. Then, once again, the spotlight fades. Those of us who can return to our daily lives may slip into a form of hibernation, waiting for the next sudden awakening in an emergency. Perhaps we become accustomed to the risk, or unconsciously try to free ourselves from the burden of responsibility to act.

“Safety first.” Yet, in peacetime, improving the structural and seismic safety of buildings rarely becomes the primary driver for interventions across the existing building stock.

Technical complexity and, above all, a lack of financial resources are typically identified and claimed to be the main obstacles to implementing broader, long-term plans.

How much does doing nothing cost us? 

In Italy, over the past 50 years, the social costs of earthquakes have included thousands of deaths, injuries, displacement and other impacts. Direct economic costs, such as repair and reconstruction, together with indirect costs, including downtime, lost productivity, reduced consumption and development, lower gross domestic product (GDP) and increased public debt, have amounted to approximately EUR 750–1,500 billion in those 50 years period according to a 2022 research by the author , based on estimates of direct reconstruction costs and broader economic losses from major earthquakes.This is equivalent to a significant and financially unsustainable loss of around EUR 15–30 billion per year, comparable to —or even exceeding—the scale of a major annual national fiscal package and plan .

We must also consider environmental costs , including carbon dioxide (CO₂) emissions , energy consumption associated with repair and reconstruction , and the disposal of debris and construction waste. Effectively, this can mean rebuilding parts of, or even entire, cities all over again.

It is as if we had taken out a 50-year seismic mortgage. Yet, without investment in prevention, every year we pay substantial interest instalments – a huge seismic bill – without repaying the principal. The impacts on society, the economy and the environment continue without reducing the problem at its source: seismic risk, not the earthquake itself.

From a passive approach to prevention

We need a step change in our paradigm, culture and communication. We must move from a passive approach to an active, pragmatic and coordinated national and international prevention plan.

Such a plan should be based on a rigorous scientific methodology that considers current conditions, objectives, approaches, resources, timelines and priorities. Strategies and decisions should be informed by cost-benefit analyses within a broader multi-criteria framework that considers not only financial costs and benefits, but also social, environmental and resilience outcomes.

We have already put aspects of this approach into practice in New Zealand, a pioneering country in earthquake engineering. Concepts such as ductility, capacity design and base isolation were developed and advanced there.

Modern earthquake engineering relies on ductility, meaning a building's ability to bend and deform during an earthquake without collapsing. Through a design approach known as capacity design, engineers deliberately direct earthquake forces to specific parts of a structure that can safely absorb and dissipate energy. Similar to the crumple zones in a car, these areas are intended to sustain controlled damage while protecting the rest of the building and, most importantly, the people inside. Combined with innovations such as base isolation, which reduces the transfer of ground motion into a building, these approaches have significantly improved earthquake resilience in many countries. However, while modern buildings are designed to save lives , they may still suffer substantial damage and require costly repairs after a major earthquake.

The 2010–2011 earthquake sequence devastated the city of Christchurch, on New Zealand’s South Island, resulting in reconstruction costs of NZD 45-50 billion – approximately 20-25 per cent of GDP . Such losses would place considerable pressure on any national economy.

In this case, the financial impact was supported through a hybrid public–private insurance and reinsurance system, including the Earthquake Commission (EQC) , whose framework was subsequently revised through the Natural Hazards Insurance Act 2023 .

I had the opportunity and privilege to make a civic contribution, in my technical and institutional role as President of the New Zealand Society for Earthquake Engineering (NZSEE). Working with the government and other stakeholders, we helped develop a mandatory national plan for seismic risk reduction. In the immediate aftermath of the devastating 22nd Feb 2011 earthquake, we had been advocating   “strict enforcement, including financial incentives, of active policies for the seismic retrofit of existing buildings at a national scale.” 

The plan was mandatory, but did not include at a national level the tax incentives we had proposed in the form of tax rebate/reduction, rates remission, building consent-fee reimbursement, fast-track building consent schemes or extra-volume granted to the building under restoration. Those incentives were not approved at the time, with the exception of some Territorial Authorities such as the capital Wellington City Council but, years later, are now being reconsidered and are currently under intense discussion and debate. The experience highlights the importance of pairing mandatory safety requirements with financial incentives that help property owners act before a disaster occurs.

Financing prevention as an investment

We need an integrated, hybrid national financial ecosystem that combines public and private financial instruments without placing the entire burden on public finances

Such an ecosystem could combine:

• Targeted tax incentives and tax credits for integrated seismic and energy retrofitting, linked to improvement in the Seismic + Energy Risk Class Rating rather than simply to expenditures. 
• Long-term, low-interest resilience loans and mortgages, supported by public guarantees and potentially offered through commercial banks, allowing the upfront cost of integrated retrofitting to be spread over the long-term life and benefits of the intervention.
• Public guarantee schemes and revolving funds, where limited public resources are used to leverage substantially larger volumes of private capital rather than directly funding the entire retrofit cost.
• Risk-based mortgage and insurance conditions, rewarding buildings that achieve demonstrably lower seismic risk (class/rate) through more advantageous mortgage interest rates, insurance premiums and conditions 
• Catastrophe bonds, reinsurance and risk-transfer instruments, complementing — rather than replacing — physical risk reduction and providing financial protection against the residual risk that cannot economically be eliminated.
• Property-value capture mechanisms, recognising that seismic and energy upgrading can increase the economic value, safety, insurability and marketability of the asset, thereby creating a tangible return for property owners.
• Targeted public grants, reserved primarily for vulnerable/low-income households, strategic or public buildings, heritage assets and interventions where the wider societal benefits cannot be fully captured by the private owner.

Ultimately, the central question, therefore, is not simply how much disasters cost after they occur. It is how much we are willing, and actually capable, to keep paying by failing to reduce risk before disasters happen.

Investing in prevention means looking beyond the immediate cost of action and considering the long-term costs of inaction. Reducing seismic (and similarly other natural hazards) risk requires sustained political commitment, sound science and financial mechanisms that make prevention possible before the next earthquake (or other “natural event”) turns existing vulnerabilities into another disaster.

Stefano Pampanin is Professor of Structural and Seismic Engineering at Sapienza University of Rome since 2015;, he previously spent 16 years at the University of Canterbury in New Zealand. He served as President of the New Zealand Society for Earthquake Engineering (NZSEE) in the aftermath of the 2010–2011 Canterbury earthquake sequence.

He holds a 5-year Laurea/Master of Civil (Structures) Engineering from the University of Pavia, a Master of Structural Engineering from the University of California, San Diego (UCSD), and a PhD in Earthquake Engineering from the Politecnico di Milano. He was a Fulbright Scholar at UCSD and is a Fellow of both Engineering New Zealand (formerly IPENZ) and NZSEE.