The Impacts of Natural Disasters A Framework for Loss Estimation (1999) / Chapter Skim
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2 Direct Losses of Natural Disasters
2 Direct Losses of Natural Disasters
Pages 15-34
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From page 15... ...
This chapter is devoted to direct loss measurement and those direct loss data which should be included in loss estimates. Chapter 3 is devoted to an assessment of indirect losses and ways in which indirect loss estimations might be improved.
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From page 16... ...
~ In some analyses, what we have labeled "direct secondary losses" are treated as indirect losses. We do not do so here because such damage as is caused by fire following an earthquake or additional rain following a hurricane, for example, entails physical destruction, whereas the indirect losses we discuss in the next chapter all result from that destruction.
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. Natural disasters generally result in the following categories of destruction: to property (structures, contents, and transportation vehicles)
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There necessarily is some element of judgment required in deciding at what point to cut off the cumulating claims following a specific event or whether to treat a series of events such as several clays of heavy rainfall or an earthquake followed by several aftershocks as a single event for purposes of satisfying the dollar threshold. Rather than offer specific recommendations for this problem, we suggest that the agencies we recommend be charged with additional data collection responsibilities (clescribec!
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From page 19... ...
The most comprehensive data base of insurance claims payments for property damage is the one compiled by Property Claims Services for catastrophe-triggered events. PCS has collected these data since 1949, using a dollar cost threshold to determine whether an event qualifies as a major disaster.
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in 1994 began to compile more disaggregated catastrophe claims information, using the PCS dollar cost thresholds. The IBHS data base compiles actual paid losses of large insurers who account for most of the property-casualty market.
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The main source of federal disaster aid is FEMA, which provides grants to individuals, states, and local governments suffering damage due to presidentially declared disasters. When the president cleciares an area eligible for 7 This discussion is based in part on a meeting certain members of the committee and the NRC staff had with representatives of federal agencies involved in disaster aid and planning.
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. Unemployment insurance costs are part of the indirect losses we discuss in the next chapter.
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Meanwhile, the National Flood Insurance Program (NFIP) , provides floor!
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In addition, this information is critical for developing and implementing costeffective ways to mitigate the losses of natural disasters. Comprehensive data on the federal covernment's spending on disasters would assist both the executive ant!
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now carry." Losses to Businesses To the extent businesses have insurance for property damage, their covered losses are included in the losses borne by insurance companies. Nonetheless, because insurance policies carry deductibles, even insured commercial operations suffer some losses, whereas businesses that self-insure for natural disasters absorb all of the losses themselves.
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From page 26... ...
by earthquake insurance. Similarly, most potential victims of flood damage do not purchase insurance through the National Flood Insurance Program.
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From page 27... ...
As valuable as it is, the NWS data set contains two shortcomings for purposes of this report: it excludes fatalities and injuries from earthquakes and other geohazarcis, and it is not clear if the data on disasters below some dollar loss threshold can be easily separated from the larger disasters that, in our view, should be the primary focus of a comprehensive federal disaster data collection effort. STANDARDIZING LOSS ESTIMATES In addition to the lack of a comprehensive data base, there exists no stanciardized estimation technique or framework for compiling loss estimates from individual disasters.
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From page 28... ...
If used consistently, this framework should allow the fecieral government to begin to compile more consistent loss estimates, better understand trends in losses, and ultimately provide a basis for better decisions in I~azar~i mitigation policy.
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. NOTE: If possible, direct primary and secondary losses should be tabulated separately.
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The U.S. Department of Commerce is a logical agency to carry out this assignment because two of its major components already have related responsibilities: the National Weather Service compiles loss estimates for all weather-related disasters ant]
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RECOMMENDATION 2-2: The agency charged with the overall data collection should obtain insured paid claims data from available sources, such as PCS and IBHS. In addition, the agency should work with relevant trade associations, especially the National Association of Insurance Commissioners (NAIC)
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RECOMMENDATION 2-3: The agency charged with data collection responsibilities must also strive to collect data on losses incurred by uninsured individuals, businesses, and governments that are not otherwise reimbursed by disaster aid from some other level of government (typically the federal government)
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From page 33... ...
to develop a standardized definition of what events to include in the data base. One obvious defining characteristic collie be dollar loss above a certain threshold, as cletermined by a preliminary assessment of direct losses (for example, by using loss estimation moclels such as HAZUS)
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From page 34... ...
by the availability anti effectiveness of emergency response measures. Separate data on secondary losses can help policymakers to assess existing response measures, in design and in practice, and to develop improvements in the future.
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