Probabilistic Forecasting of Life and Economic Losses due to Natural Disasters

Abstract:

The magnitude of natural hazard events such as hurricanes, tornadoes, earthquakes, and floods are traditionally measured by wind speed, energy release, or discharge. In this study we investigate the scaling of the magnitude of individual events of the 20^th and 21^stcentury in terms of economic and life losses in the United States and worldwide. Economic losses are subdivided into insured and total losses. Some data sets are inflation or population adjusted. Forecasts associated with these events are of interest to insurance, reinsurance, and emergency management agencies.

Plots of cumulative size-frequency distributions of economic and life loss are well-fit by power functions and thus exhibit self-similar scaling. This self-similar scaling property permits use of frequent small events to estimate the rate of occurrence of less frequent larger events. Examining the power scaling behavior of loss data for disasters permits: forecasting the probability of occurrence of a disaster over a wide range of years (1 to 10 to 1,000 years); comparing losses associated with one type of disaster to another; comparing disasters in one region to similar disasters in another region; and, measuring the effectiveness of planning and mitigation strategies.

In the United States, life losses due to flood and tornado cumulative-frequency distributions have steeper slopes, indicating that frequent smaller events contribute the majority of losses. In contrast, life losses due to hurricanes and earthquakes have shallower slopes, indicating that the few larger events contribute the majority of losses. Disaster planning and mitigation strategies should incorporate these differences.