The Economic Consequences of a Catastrophic Earthquake Proceedings of a Forum (1992) / Chapter Skim
Currently Skimming:
7 HOW DO CURRENT RELIEF POLICIES AFFECT RECOVERY EFFORTS?
7 HOW DO CURRENT RELIEF POLICIES AFFECT RECOVERY EFFORTS?
Pages 156-177
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 156... ...
He is currently the assistant associate director for disaster-assistance programs at FEMA, which makes him responsible for managing the federal response to presidentially declared disasters. His topic covers the federal disaster-relief programs following a catastrophic disaster.
|
From page 157... ...
State govern merit is in dire straits economically, in spite of a healthy economy. In addition, California lacks flexibility to spend tax revenues.
|
From page 158... ...
After the Loma Prieta earthquake, the Legislature and governor agreed on a 1/2 percent Increase in the sales tax for 13 months, but there is little political support for increasing personal income tax, sales tax, bank and corporation tax, or insurance premium taxes, except for a short period. Support might exist for increasing the sin taxes -- tobacco, liquor, and horse racing -- but those only account for 1 percent of the General Fund.
|
From page 159... ...
Sufficient state aid is not a sure thing, and this can be illustrated by the way California coped with the Loma Prieta earthquake. After it occurred, the governor first drew on his Fund for Economic Uncertainties.
|
From page 160... ...
State Proposition 122 authorizes a $300 million bond measure for retrofit of state and local government buildings; approximately $150 million win be used for repairs to three state office buildings. California voters also passed Propositions 108 and 111 to authorize transportation bonds and increase gas tax for new freeways.
|
From page 161... ...
The need for federal participation in a catastrophicearthquake- insurance program is so important to the public, the state of California, and the insurance industry that it is imperative we reach an understanding. Earthquake insurance and disaster aid must be evaluated as part of an economic-recovery-management program.
|
From page 162... ...
Mitigation should be an important insurance-~ndustry strategy now. It is clear the insurance industry has to deal with its role in mitigation before we can talk about federal participation in earthquake insurance.
|
From page 163... ...
One town in particular was the community of Xen~a, Ohio, that was devastated by a tornado, and Congress at that point enacted a federal disaster-relief program, Public Law ~ ~ ~ ~ A A ~ ~ ,~ 93-288. This essentially established a federal reliet program or substantial efforts to deal with immediate recovery activities and funding to the extent of dealing with temporary housing for disaster victims and individual and family grants In concert with the states to those that had unmet needs.
|
From page 164... ...
So in 1986, some 25 agencies and the American Red Cross agreed to develop a plan for federal response to a catastrophic earthquake, and this plan'iing process has been going on during the past 3 or 4 years. Last August, almost a year ago, this plan was tested in California, and it was a Hayward fault earthquake exercise that was conducted ~ Sacramento, involving the state of California along with many federal agencies, local governments, and many other states being there as observers.
|
From page 165... ...
The plan that we have utilized is the Federal Response Plan. We also utilized portions of the plan in California when the Loma Prieta earthquake occurred, because we did not know the magnitude of it.
|
From page 166... ...
My observation of that exercise was that the plan that would be used to deal with such a thing once again resides in the Catastrophic Disaster Response Group that has dealt with Hugo, Loma Prieta, and probably would deal with such things as a terrorism incident In this country. There has not been a great deal of planning, nor is there a fun awareness of the implications of such events.
|
From page 167... ...
And our argument is that we either put it back to its predisaster condition or that we build a new facility, and the new facility would obviously be a lot cheaper than putting it back to its historic structure state, enhanced to current codes and ordinances. So the big debate there is cost implications.
|
From page 168... ...
That was such a good idea that when the Whittier earthquake Came along on October 1, 1987 and was a 5.9 earthquake, that special cad was repeated, and the reported insured losses were $73 million. This time, when the Loma Prieta earthquake came along, I issued a much more detailed special call, and I now have about five boxes of data.
|
From page 169... ...
This was also the first time ever that any regulator asked life and health insurance companies for data on life and health insurance, and we received 5 death claims for a total incurred loss of $498,000, 21 accident and health claims for a total loss of $828,000. Now, we do not know whether we got all the A&H claims, because the life insurers are not set up to handle that, but they will be trained.
|
From page 170... ...
It is simply based on a demand-, an individual demand for earthquake coverage, and that demand is broad based, as shown by these figures and also by the fact that In the San Francisco Bay area, as I mentioned, over 30 percent of the people have earthquake insurance, and they are paying quite a bit, $200 to $400 for this coverage. Now, there is an economic question that occurred to me in these figures.
|
From page 171... ...
The book lists extensively the data and the loss curves, loss-overdeductible curves, for the San Fernando and Whittier earthquakes, and this is particularly important for insurance purposes, because it gives the amount of loss that the insurance company can expect for a 5 percent deductible or a 10 percent deductible or a 15 percent deductible and also for a zero deductible, so it gives the total loss that is expected for a particular type of building, a particular type of home. The expected loss varies dramatically whether it is pre-World War II or post-World War II or whether it is wood frame or masonry or it is built on wood foundation or a concrete foundation.
|
From page 172... ...
So they went out and with a great deal of difficulty, they bought $1 billion worth of coverage for risks in New Zealand. Reportedly, they have just bought with great difficulty that second billion dollars of coverage in the world market, and so the insurance industry just cannot really expand its coverage of commercial, because there is not any reinsurance market available.
|
From page 173... ...
What happened is that after the major earthquake, there is a huge demand on the state legislature and on the federal government for disaster-relief loans, so you have this sudden, unexpected, unwelcome demand on the financial resources of the state. A third issue that came up was that the Northern Auto Club had a $1,500 coverage for temporary living expense.
|
From page 174... ...
Is that a vibration damage only or does that include fire following and additional living expenses?
|
From page 175... ...
There is an interesting study relevant to your question. Ron Gallagher, who is a structural engineer, did a survey after the Loma Prieta earthquake of the costs of repairs to s~ngle-family houses and mobile homes.
|
From page 176... ...
If the insurance industry cannot handle big claims, which are the ones that they are now having, then there is a reason to call in the federal government. But when you are talking about small claims, 20 percent deductible, 10 percent deductible, and the industry's ability to deal with them, I do not think that is the right way to approach it.
|
From page 177... ...
It would be a cost that the seller would have to bear. It is another bill where the insurance industry is neutral, yet we need a governor's signature on that bill.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.