The Impacts of Natural Disasters A Framework for Loss Estimation (1999) / Chapter Skim
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1 Estimating the Losses of Natural Disasters
1 Estimating the Losses of Natural Disasters
Pages 3-14
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From page 3... ...
These disasters and their impacts have become part of our history: the drought in the central United States in 1988, Hurricane Andrew in 1992, and the Northridge California earthquake of 1994 were the nation's three most costly to date. Through the course of this committee's study, tile nation experienced a severe ice storm in the northeast Uniteci States, devastating floods along the Rio Grande and in southeast Texas, heavy rains and landslides in southern California, a fiveweek succession of wilcifires in Florida, a severe drought in south and east Texas, and three major hurricanes which impacted the southeastern United States.
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4 1 The Impacts of Natural Disasters: A Frameworkfor Loss Estimatlor'
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,, , ~ The formal charge to this committee was to "identify the cost components that, when combined, would most accurately reflect the total cost of a natural disaster event. To tile extent possible, the committee will identify the relative importance of the components for accurate characterization of an individual event and the significance of the different components across the spectrum of hazards.
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From page 6... ...
Year Event Reported Loss Source 1988 Droughta $39 billion Riebsa~ne et al., 1991 1992 Hurricane Andrew $30 billion Pielke, 1995 ~ 993 Midwest floodsa $ ~ 9 billion Changnon, 1996 1994 Northridge earthquake $44 billion Eguchiet all, 1998 a Direct and indirect losses combined. Other estimates refer only to direct losses.
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From page 7... ...
Catastrophes in the United States are identified, tracked, and reported by Property Claims Services (PCS) , an insurance industry organization specializing in the property insurance business.
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PCS currently identifies a catastrophe as an event which causes $25 million or more in insured, direct property Carnage, and affects a significant number of property owners. This threshoici has been adjusted thorough time: when PCS was founded in 1949, $1 million of insured, direct property damage constituted a catastrophe, in 1983 it was revised to $5 million, ant!
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From page 9... ...
The fea7eraZ government has a strong interest, on behalf of taxpayers, in accurate and comprehensive direct loss data. Largely through tile Federal Emergency Management Agency, but also through several older agencies, the federal government covers a substantial portion of disaster-incluced losses that are suffered by local and state governments, as well as by in~iividuals anti businesses, that are otherwise privately uninsured.
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From page 10... ...
In pursuing mitigation, policymakers should take account not only of the direct costs that such measures may avoid but also of the total disaster-related losses that is, the claims paid by private insurers and government plus the uninsured losses that victims of disasters suffer (including, to the extent practicable, estimates of the indirect losses, which are discussed in Chapter 3) that may be prevented.
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From page 11... ...
Ex post analysis of the 1993 Mississippi floods, for example, led to needed revisions in crop insurance, flood insurance premiums, as well as broader programmatic changes in flood insurance. Insurers clearly have a commercial interest in accurate data on costs covered under their policies: claims for property damage arid related economic
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From page 12... ...
Finally, researchers and experts in disaster loss estimation could benefit enormously from having a standardizeci data base of losses and other impact information that would permit them to improve their models that estimate both direct and indirect losses of disasters. Such improvements, in turn, wouIci assist policymakers in designing cost-effective mitigation policies by simulating benefits anal costs of alternative policies.
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From page 13... ...
In addition, J private homeowners' insurance typically does not cover flood loss (flood insurance must be purchased separately through the National Flood Insurance Program, managed by FEMA) , and it may not cover earthquake damage unless specifically purchased (and ever then, coverage may be limited)
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From page 14... ...
a governor secures help from the president, and fund many disaster mitigation endeavors.4 In addition, significant costs are borne by volunteer disaster relief organizations, which are important sources of loss data. 4 For a discussion of the various sources of disaster relief see Kunreuther and Roth (1998)
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