Abstract
In the past year alone, multiple locations in the United States have sustained significant loss of life and damage to property from hurricanes, droughts, floods, tornados, earthquakes, wildfires, and mudslides, whose total cost for remediation may approach $100 billion. Bearing in mind growing threats from sea-level rise in coastal areas and the increased incidence of extreme weather events (some of which are of “100-year” or “200-year” magnitude), prudence alone would suggest the importance of establishing an up-to-date big picture view of disasters of natural and human provenance in the United States, and their implications for the locations in which they are experienced. In their recent monograph, Vera Brusentsev and Wayne Vroman have provided a timely survey of disasters in the U.S., examining a number of major disasters that pose some of the greatest risks to the U.S. and discussing some of the complex issues associated with mitigation efforts. The book is a source of useful and accurate information on the frequencies of different disaster types, their costs, and what compensation has been or is now available to victims.
Brusentsev and Vroman define natural hazards as natural phenomena with potential to cause destruction. When a hazard has a negative effect on human beings and overwhelms their ability to cope (i.e., overwhelms their resilience) then it is termed a disaster. Natural disasters occur when “natural phenomena cause physical damage, injury, or loss of lives and assets, environmental degradation, disruption in the livelihoods and services of individuals and communities, and interruptions in social and economic activity” (p. 1). (Risk is the probability of the occurrence of a hazard that causes physical harm or financial losses.) Disasters occur because of the combination of natural hazards and human vulnerability.
The authors separate the analyses of disasters according to hazard category: biological, geological, hydro-meteorological, and technological. The disasters they consider include droughts, floods, hurricanes, tornados, wildfires, and geological and man-made types. Disasters are officially declared by the Federal Emergency Management Agency (FEMA), who also make emergency declarations and fire management assistance declarations.
In over 10 chapters, the authors concern themselves with six questions: 1) What do we know about disasters in the United States? 2) Has there been an increase in their frequency? 3) What are the financial costs associated with disasters? 4) What compensation is available to survivors? 5) Where is each type of disaster likely to occur? 6) How can disasters be mitigated? (p. 8)
In addressing these questions, the authors reference an extensive (natural and social) scientific literature and pursue an empirical analysis of databases that are publicly available from FEMA and the National Oceanic and Atmospheric Administration.
A signature feature of the volume is the implementation across disaster types and geographic regions of ordinary least squares regression analyses of time-series data to establish whether and where robust trends exist. The authors find that floods and tornados account for about three quarters of all major disasters, but hurricanes dominate all other types of disaster in terms of the magnitude of event-related losses. While, because of improved science and technology, fewer lives are being lost when disasters occur, the total amount of physical destruction and financial loss has been increasing because the number of disaster-related events has been rising and more valuable assets are now being exposed to hazards. The authors’ analysis suggests that generalities cannot be made about the impacts of disasters on local labor markets—the labor market of the New York Metropolitan Area was quick to absorb the impacts of superstorm Sandy, whereas the labor market of the Louisiana delta area is still recovering from Hurricane Katrina.
The authors’ writing style is a bit dry, as perhaps befits the topic and the nature of the volume, but the entire text should be accessible to the interested educated lay person. The authors provide careful definitions of all technical terms. Because of the range of disaster types, relevant scientific disciplines, government agencies, and operative programs, the text is awash in acronyms; however, their use is unavoidable and a page of acronym definitions is provided at the front of the volume, where it is easily located.
In the volume’s final chapter, the authors examine the role of private insurance and public-private partnerships in providing coverage for adverse events and outline some of the problems that inhere to current insurance programs. Insurance against hazards is, in their eyes, a most valuable tool for managing risk. In view of the importance of insurance, the remainder of this review will focus on several aspects of this subject the authors discuss.
Three general requirements that must be met for a market for insurance to function well are that (1) hazards and losses must occur with sufficient frequency so that insurance providers can develop accurate estimates of distributions of potential losses; (2) the act of insuring must not alter the distribution of the losses (in other words, must not create a moral hazard); and (3) the parameters of loss distributions must be stable over time so that actuarially fair policies can be devised. The most common insurance policy for U.S. homeowners, the “Homeowner-3” policy, provides coverage for losses from hazards, although there are some deductions in some locations where risks of windstorms, tornados, and hurricanes are high. (The authors observe that most homeowners underestimate risks.) Earthquake policies can also be purchased in all states but California. Highly subsidized policies for events with low probability and high cost defeat the objective of insurance because they can drive firms providing insurance from the market. The authors discuss new forms of social insurance, according to which individuals can contribute in advance to a program that will assist them in times of personal need. (This innovation has worked well in some developing countries vulnerable to hazards from earthquakes.) Given the rising costs of remediation of natural disasters, it would seem reasonable that all forms of hazard insurance—conventional and alternative—should be considered carefully and adopted judiciously.
Scholars and practitioners in the area of economic development should find this well-researched, well-documented, and well-written monograph helpful in understanding natural disasters, and should become better informed about aspects of changing natural and built environments in the United States that must be accounted for in economic development going forward as both the frequency and severity of disasters continue to increase.