session 8 paying for large- scale disasters public administration and emergency management

Session 8Session 8Paying for Large-Paying for Large-Scale DisastersScale Disasters

Public Administration and Public Administration and Emergency ManagementEmergency Management

ObjectivesObjectives

►At the conclusion of this session, At the conclusion of this session, students will be able tostudents will be able to Discuss the public sector budget process Discuss the public sector budget process Discuss the costs of large-scale disasters Discuss the costs of large-scale disasters

to governments and to individuals and to governments and to individuals and private firmsprivate firms

Discuss the federal funding process for Discuss the federal funding process for disastersdisasters

Discuss the issues of earthquake Discuss the issues of earthquake insurance and disaster insuranceinsurance and disaster insurance

Student readingsStudent readings

► Nicholas Henry (2010) “The Public Trough: Nicholas Henry (2010) “The Public Trough: Financing and Budgeting Governments” Financing and Budgeting Governments” (Chapter 8), in (Chapter 8), in Public Administration and Public Public Administration and Public AffairsAffairs, 11th Edition (Hoboken, NJ: Longman), , 11th Edition (Hoboken, NJ: Longman), pp. 165-205.pp. 165-205.

► Richard T. Sylves (2007) “Budgeting for Richard T. Sylves (2007) “Budgeting for Emergency Management,” in Emergency Management,” in Emergency Emergency Management: Principles and Practice for Local Management: Principles and Practice for Local GovernmentGovernment, 2nd Edition, edited by William L. , 2nd Edition, edited by William L. Waugh, Jr., and Kathleen Tierney (Washington, Waugh, Jr., and Kathleen Tierney (Washington, DC: ICMA), pp. 299-318.DC: ICMA), pp. 299-318.

Public sector budgeting Public sector budgeting processprocess

► Public financePublic finance is the raising of revenues is the raising of revenues through taxation and other means to fund through taxation and other means to fund public policies (Henry, 2010: 165).public policies (Henry, 2010: 165).

► Most revenues are put into the Most revenues are put into the general fundgeneral fund and can be spent for any government and can be spent for any government purpose. purpose.

► Special fundsSpecial funds are created for specific are created for specific purposes and cannot be diverted to other purposes and cannot be diverted to other purposes. Social Security funds, for purposes. Social Security funds, for example, cannot be spent for other example, cannot be spent for other purposes. Some special funds are self-purposes. Some special funds are self-supporting in that they generate revenue, supporting in that they generate revenue, e.g., user fees, to support a specific program.e.g., user fees, to support a specific program.


► Some expenditures are termed Some expenditures are termed uncontrollable,uncontrollable, such as interest payments on such as interest payments on the national debt and Social Security. the national debt and Social Security. Roughly 63 percent of federal spending is in Roughly 63 percent of federal spending is in this uncontrollable category (Henry, 2010: this uncontrollable category (Henry, 2010: 166).166).

► State and local governments may also have State and local governments may also have special funds, such as insurance trusts, special funds, such as insurance trusts, charges for specific services, and customer charges for specific services, and customer payments for government-owned enterprises payments for government-owned enterprises (e.g., utilities) (Henry, 2010: 167).(e.g., utilities) (Henry, 2010: 167).


► Many public authorities and special districts Many public authorities and special districts were created to expand the taxing and were created to expand the taxing and borrowing authority of communities. Local borrowing authority of communities. Local government taxation and borrowing authority is government taxation and borrowing authority is generally limited by state law, but school generally limited by state law, but school districts, for example, have authority to tax districts, for example, have authority to tax residents and borrow money for construction residents and borrow money for construction and other projects. and other projects.

► For public agencies, as well as other For public agencies, as well as other organizations dependent upon public funding, organizations dependent upon public funding, much of the federal, state, and local budgets are much of the federal, state, and local budgets are already spoken for. They compete for shares of already spoken for. They compete for shares of the more controllable parts of the budget.the more controllable parts of the budget.


► Many local governments require that requests Many local governments require that requests for funding include recommendations to for funding include recommendations to generate the requested funds, such as user generate the requested funds, such as user charges, surtaxes, and other tax increases. charges, surtaxes, and other tax increases.

► The tax revolts of the 1970s and 1980s have The tax revolts of the 1970s and 1980s have made it difficult in states like California to made it difficult in states like California to pass tax increases, even for popular and pass tax increases, even for popular and essential programs.essential programs.

► There is widespread popular opposition to tax There is widespread popular opposition to tax increases and frequent calls for tax cuts. increases and frequent calls for tax cuts. Funding for old and new programs is scarce. Funding for old and new programs is scarce.


► This is the environment in which emergency This is the environment in which emergency managers operate. They have to compete for managers operate. They have to compete for funding with other essential services. Therefore, funding with other essential services. Therefore, the budgetary process and cycle are extremely the budgetary process and cycle are extremely important if they are to understand when and important if they are to understand when and how they can request new funds and may be how they can request new funds and may be required to defend their current funding. required to defend their current funding.

► The federal budgetary process has evolved The federal budgetary process has evolved considerably since the line-item budgets of considerably since the line-item budgets of 1916-1939. Line-item budgets were simply 1916-1939. Line-item budgets were simply focused on how many paperclips or file cabinets focused on how many paperclips or file cabinets an agency said that it needed (Henry, 2010: an agency said that it needed (Henry, 2010: 183). 183).


► The evolution has included foci on The evolution has included foci on programs, performance, long-term programs, performance, long-term planning, budget justification, and planning, budget justification, and results. The current system, target results. The current system, target base budgeting or top-down budgeting, base budgeting or top-down budgeting, involves the chief executive setting involves the chief executive setting funding targets and agency officials funding targets and agency officials working within those targets to achieve working within those targets to achieve programmatic goals. programmatic goals.


►When revenues are down, agencies are forced When revenues are down, agencies are forced to cut back. Short-term cuts include hiring to cut back. Short-term cuts include hiring freezes and across-the-board cuts which freezes and across-the-board cuts which usually affect agencies with high-skilled usually affect agencies with high-skilled workers more than agencies with low-skilled workers more than agencies with low-skilled workers and projects that can be slowed down. workers and projects that can be slowed down. Long-term reductions in expenditures may Long-term reductions in expenditures may require reorganizations, improved productivity, require reorganizations, improved productivity, alternative service delivery, new technologies, alternative service delivery, new technologies, and/or simply cutting lower performing and/or simply cutting lower performing programs (Henry, 2010: 188-189).programs (Henry, 2010: 188-189).


► Since 1993, the federal government has Since 1993, the federal government has used a “Budgeting for Results” system used a “Budgeting for Results” system that focuses on performance which that focuses on performance which necessarily requires the development of necessarily requires the development of performance metrics (measures). performance metrics (measures).

► Some elements of the older budgeting Some elements of the older budgeting systems remain, but agency officials systems remain, but agency officials necessarily have to focus on providing necessarily have to focus on providing evidence of performance both to justify evidence of performance both to justify current and future spending.current and future spending.


► This is the procedural environment This is the procedural environment in which public administrators in which public administrators function. Generating data on function. Generating data on performance is essential. performance is essential. Developing a budget strategy that Developing a budget strategy that protects old programs and justifies protects old programs and justifies new expenditures is an art.new expenditures is an art.

Public sector budgeting Public sector budgeting politicspolitics

► Aaron Wildavsky, in his classic Aaron Wildavsky, in his classic The Politics of the The Politics of the Budgetary ProcessBudgetary Process, outlined strategies that , outlined strategies that officials might use to increase their agency officials might use to increase their agency budgets. Cultivating a clientele to support budgets. Cultivating a clientele to support agency budget requests is a popular tactic. agency budget requests is a popular tactic. Suggesting cuts in popular programs (the Suggesting cuts in popular programs (the “Washington monument ploy”) can encourage “Washington monument ploy”) can encourage the executive and/or legislative body to restore the executive and/or legislative body to restore funding, initiating new programs (the sunk cost funding, initiating new programs (the sunk cost or “camel’s nose under the tent” tactic), building or “camel’s nose under the tent” tactic), building credibility with reviewers, and capturing the credibility with reviewers, and capturing the imagination of reviewers can be useful. imagination of reviewers can be useful.


► Knowledge of the budgeting cycle is Knowledge of the budgeting cycle is essential to the implementation of an essential to the implementation of an effective strategy. effective strategy.

The beginning of the federal fiscal year (the new The beginning of the federal fiscal year (the new budget) is on October 1st and ends on September budget) is on October 1st and ends on September 30th, if Congress has passed the requisite 30th, if Congress has passed the requisite appropriation bills. appropriation bills.

Most state and local budget years begin on July Most state and local budget years begin on July 1st and end on June 30th. Normally, budget 1st and end on June 30th. Normally, budget processes begin a year or more prior to the processes begin a year or more prior to the beginning of the fiscal year in terms of the beginning of the fiscal year in terms of the executive communicating budget targets.executive communicating budget targets.


Planning for some budget items, such as weapons Planning for some budget items, such as weapons systems, may begin many years before funding is systems, may begin many years before funding is expected. expected.

Knowing the status of the budget process, what targets Knowing the status of the budget process, what targets the executive or legislature have communicated, which the executive or legislature have communicated, which office or legislative body is considering the proposal, office or legislative body is considering the proposal, whether the process is at the “guns versus butter” stage whether the process is at the “guns versus butter” stage (spending on national security and social programs) or at (spending on national security and social programs) or at the “nuts and bolts” stage of agency budgets, and when the “nuts and bolts” stage of agency budgets, and when opportunities will arise for the presentation of the opportunities will arise for the presentation of the agency’s case for funding. agency’s case for funding.

At the federal level, Congressional debate over agency At the federal level, Congressional debate over agency budgets generally ends in the spring prior to the budgets generally ends in the spring prior to the beginning of the fiscal year, although some changes may beginning of the fiscal year, although some changes may take place later.take place later.


► Agency heads have to choose which budget Agency heads have to choose which budget strategy will work best for their agency, use their strategy will work best for their agency, use their opportunities to make their arguments to the opportunities to make their arguments to the head of the department and to the chief head of the department and to the chief executive, to the budget office, the legislative executive, to the budget office, the legislative committee responsible for authorizing new committee responsible for authorizing new spending, the legislative committee responsible spending, the legislative committee responsible for appropriating funds, and to other influential for appropriating funds, and to other influential stakeholders, as well as to clients who can be stakeholders, as well as to clients who can be mobilized in support of the program.mobilized in support of the program.

► For emergency management administrators, the For emergency management administrators, the “window of opportunity” for funding is in the “window of opportunity” for funding is in the immediate aftermath of a disaster. Support for immediate aftermath of a disaster. Support for emergency management dissipates over time if emergency management dissipates over time if there has not been a disaster. there has not been a disaster.


► The funding for federal disaster response and The funding for federal disaster response and recovery efforts is generally through supplemental recovery efforts is generally through supplemental appropriations, not the annual budget. State and appropriations, not the annual budget. State and local governments might create a sales tax to local governments might create a sales tax to support recovery. support recovery.

► There were political costs associated with the poor There were political costs associated with the poor response to the Katrina disaster in 2005 and response to the Katrina disaster in 2005 and federal, state, and local officials have been more federal, state, and local officials have been more attentive to emergency management issues since attentive to emergency management issues since then. then.

► There are also concerns about legal liability for There are also concerns about legal liability for local officials if they fail to prepare reasonably for local officials if they fail to prepare reasonably for disaster. Local officials enjoy immunity if they are disaster. Local officials enjoy immunity if they are following state or federal law, but may be liable if following state or federal law, but may be liable if they are exercising their own discretion.they are exercising their own discretion.

ExerciseExercise

► How would you develop a budget strategy to How would you develop a budget strategy to protect the funding of your emergency protect the funding of your emergency management office or agency. Why is emergency management office or agency. Why is emergency management more deserving of funding than other management more deserving of funding than other agencies? agencies?

► What are the principal arguments for increased What are the principal arguments for increased funding of emergency management programs? funding of emergency management programs?

► What stakeholders might be mobilized to support What stakeholders might be mobilized to support the agency in budget hearings and before the chief the agency in budget hearings and before the chief executive? Are there sources of funding that might executive? Are there sources of funding that might be used to support emergency management be used to support emergency management programs, such as mitigation programs? programs, such as mitigation programs?

Discussion QuestionsDiscussion Questions

► 1. What is the likelihood of tax increases to 1. What is the likelihood of tax increases to support hazard mitigation or preparedness support hazard mitigation or preparedness programs today?programs today?

► 2. How might emergency managers secure 2. How might emergency managers secure special funding? What would be involved?special funding? What would be involved?

► 3. What is the best strategy for emergency 3. What is the best strategy for emergency managers to use to secure additional managers to use to secure additional funding from the legislative body or funding from the legislative body or executive?executive?

Costs of large-scale Costs of large-scale disastersdisasters

► Appendix A has a map of the “billion dollar” Appendix A has a map of the “billion dollar” weather disasters between 1980 and 2009. NOAA weather disasters between 1980 and 2009. NOAA updates the list periodically and students can updates the list periodically and students can access the newest list at access the newest list at http://www.ncdc.noaa.gov/oa/reports/billionz.html. . The list includes The list includes

► tornadoes,tornadoes,► flooding,flooding,► hurricanes, hurricanes, ► droughts and heat waves,droughts and heat waves,► ice storms,ice storms,► blizzards,blizzards,► freezes, andfreezes, and► wildfire (including a firestorm).wildfire (including a firestorm).


► The list demonstrates that the frequency of The list demonstrates that the frequency of “billion dollar” weather disasters has “billion dollar” weather disasters has increased since the 1980s. The major increased since the 1980s. The major events have been droughts and hurricanes, events have been droughts and hurricanes, including a heat wave and drought in the including a heat wave and drought in the central and eastern U.S. in 1988 that central and eastern U.S. in 1988 that caused an estimated $40 billion in damage caused an estimated $40 billion in damage and costs and 5,000 to 10,000 deaths.and costs and 5,000 to 10,000 deaths.

► Hurricane Andrew in 1992 caused $27 Hurricane Andrew in 1992 caused $27 billion in damage and costs and 58 deaths billion in damage and costs and 58 deaths and was the most damaging hurricane and was the most damaging hurricane since the 1900 Galveston storm that killed since the 1900 Galveston storm that killed 6000 to 8000 people.6000 to 8000 people.


► Hurricane Katrina in 2005 has now become Hurricane Katrina in 2005 has now become the most damaging storm in American the most damaging storm in American history with $125 billion in damage and history with $125 billion in damage and costs and the second most deadly storm, costs and the second most deadly storm, after the 1928 hurricane in the Florida Keys, after the 1928 hurricane in the Florida Keys, with 1833 deaths.with 1833 deaths.

► During the same period, there were major During the same period, there were major earthquakes in the U.S., including the Loma earthquakes in the U.S., including the Loma Prieta earthquake of 1989 which caused $6 Prieta earthquake of 1989 which caused $6 billion in damage and the Northridge billion in damage and the Northridge earthquake of 1994 which caused over $20 earthquake of 1994 which caused over $20 billion (Burby, 1998: 3-4).billion (Burby, 1998: 3-4).


► ““Prior to Hurricane Hugo in 1989 (where Prior to Hurricane Hugo in 1989 (where insured losses were over $4 billion), the insured losses were over $4 billion), the insurance industry had never suffered any insurance industry had never suffered any loss of over $1 billion from a single loss of over $1 billion from a single disaster. Since that time 10 disasters have disaster. Since that time 10 disasters have exceeded this amount in 1977 dollars exceeded this amount in 1977 dollars (Gary Kearney, Property Claims Services, (Gary Kearney, Property Claims Services, personal communication, 1998).”personal communication, 1998).”

► The economic impact of disasters over the The economic impact of disasters over the past two decades has been enormous and past two decades has been enormous and the costs are rising. the costs are rising.

Increasing vulnerabilityIncreasing vulnerability

► For example, the exposure for losses from For example, the exposure for losses from hurricanes has grown significantly since hurricanes has grown significantly since the 1980s. In 1995, over 36 million the 1980s. In 1995, over 36 million people lived in the most hurricane-prone people lived in the most hurricane-prone counties along the coast and counties along the coast and

the population in those areas is projected to the population in those areas is projected to double by 2030;double by 2030;

the value of insured property has more than the value of insured property has more than doubled since 1980; anddoubled since 1980; and

the dollar value of those properties exceeds the dollar value of those properties exceeds $3 trillion (IIPLR, 1995: 2).$3 trillion (IIPLR, 1995: 2).


► A NOAA report in 2004 projected A NOAA report in 2004 projected that that

1.1. More than 50 percent of Americans live More than 50 percent of Americans live within 50 miles of the coast, and within 50 miles of the coast, and

2.2. 70 percent will live within 50 miles by 70 percent will live within 50 miles by 2025 2025


► Climate change is affecting the natural Climate change is affecting the natural barriers to storm surges along the coast, barriers to storm surges along the coast, storm severity is increasing, and storm storm severity is increasing, and storm tracks may shift northward, with more tracks may shift northward, with more storms making landfall along the U.S. storms making landfall along the U.S. coast.coast.

► Increasingly fragile communications and Increasingly fragile communications and power networks, higher labor costs for power networks, higher labor costs for construction (rebuilding), and higher costs construction (rebuilding), and higher costs for materials (e.g., dry wall and other for materials (e.g., dry wall and other building products) are causing recovery building products) are causing recovery costs to rise significantly (IIPLR, 1995: 13).costs to rise significantly (IIPLR, 1995: 13).


► The potential costs of disaster also encourage The potential costs of disaster also encourage attention to mitigation and preparedness needs. attention to mitigation and preparedness needs. The Kobe earthquake in Japan in 1995, for The Kobe earthquake in Japan in 1995, for example, caused an estimated $100 billion in example, caused an estimated $100 billion in damage and associated costs and has had a damage and associated costs and has had a profound impact on the Japanese economy profound impact on the Japanese economy because of the destruction of docks essential to because of the destruction of docks essential to Japanese shipping. Japanese shipping.

► The most profound economic impact from disaster The most profound economic impact from disaster has been the Katrina disaster. The damage to has been the Katrina disaster. The damage to coastal communities in Mississippi and Louisiana coastal communities in Mississippi and Louisiana may take decades to repair. Housing for low- and may take decades to repair. Housing for low- and middle-income residents is still in short supply.middle-income residents is still in short supply.

ExercisesExercises

► Identify disasters on the list of “Billion Identify disasters on the list of “Billion Dollar Weather Disasters” that might have Dollar Weather Disasters” that might have been prevented or reduced in impact. been prevented or reduced in impact.

►List the five disasters that had the List the five disasters that had the greatest impact geographically and list greatest impact geographically and list the five that were the most deadly? How the five that were the most deadly? How can the numbers of deaths be reduced for can the numbers of deaths be reduced for the five most deadly “Billion Dollar” the five most deadly “Billion Dollar” disasters?disasters?

►Discussion Questions:Discussion Questions:►Why have disaster losses grown so much in Why have disaster losses grown so much in

recent decades?recent decades?►Why does anything need to be done to deal Why does anything need to be done to deal

with the increasing disaster losses?with the increasing disaster losses?► Are droughts more serious than other kinds Are droughts more serious than other kinds

of weather disasters (see the list of “Billion of weather disasters (see the list of “Billion Dollar Weather Disasters”)?Dollar Weather Disasters”)?

►How can officials reduce the vulnerability of How can officials reduce the vulnerability of the growing population along the coast?the growing population along the coast?

Federal funding processFederal funding process

► Each year, approximately 30-35 presidential Each year, approximately 30-35 presidential disaster declarations are issued, roughly two-disaster declarations are issued, roughly two-thirds of the declarations requested (Sylves, thirds of the declarations requested (Sylves, 2007).2007).

► The issuance of a The issuance of a presidential disaster presidential disaster declarationdeclaration makes available a range of federal makes available a range of federal assistance programs to the residents and other assistance programs to the residents and other property owners in one of the designated property owners in one of the designated counties.counties.

► The process requires a request from the state The process requires a request from the state governor through the appropriate FEMA regional governor through the appropriate FEMA regional office to FEMA headquarters in Washington. office to FEMA headquarters in Washington.


► Under the Under the Stafford Act,Stafford Act, the criteria for issuing a the criteria for issuing a presidential disaster declaration are the severity presidential disaster declaration are the severity and magnitude of the event, its impact on and magnitude of the event, its impact on people and property, and whether the damage is people and property, and whether the damage is beyond the capabilities of state and local beyond the capabilities of state and local authorities.authorities.

► Typically, aTypically, a preliminary damage assessment preliminary damage assessment is conducted to determine whether the is conducted to determine whether the resources of local and state governments are resources of local and state governments are inadequate for recovery. inadequate for recovery.

► Under the Under the Disaster Relief Act of 1970Disaster Relief Act of 1970 and the and the Disaster Relief and Emergency Assistance Disaster Relief and Emergency Assistance Amendments of 1988,Amendments of 1988, the federal government the federal government is also permitted to provide limited assistance is also permitted to provide limited assistance for lesser “emergencies” (Sylves, 2007).for lesser “emergencies” (Sylves, 2007).


► The process for determining whether an The process for determining whether an emergency qualifies for aemergency qualifies for a presidential disaster presidential disaster declaration or the status of “emergency” and is declaration or the status of “emergency” and is thus eligible for federal disaster assistance is a thus eligible for federal disaster assistance is a political one (Sylves, 1996: 31-32).political one (Sylves, 1996: 31-32).

► Emergencies that draw a large amount of media Emergencies that draw a large amount of media coverage are more likely to get federal coverage are more likely to get federal assistance. This assistance. This “CNN effect”“CNN effect” is a major is a major problem for federal disaster decision makers problem for federal disaster decision makers because media coverage does not necessarily because media coverage does not necessarily mean that the emergencies are severe enough mean that the emergencies are severe enough to warrant federal assistance (Sylves, 1996: 32).to warrant federal assistance (Sylves, 1996: 32).


► Some presidential disaster declarations Some presidential disaster declarations are issued for “marginal disasters” which are issued for “marginal disasters” which could have been handled by state and could have been handled by state and local governments without federal local governments without federal assistance (Sylves, 1996: 32-34).assistance (Sylves, 1996: 32-34).

► Because there are no objective criteria for Because there are no objective criteria for the issuance of a presidential disaster the issuance of a presidential disaster declaration, governors are encouraged to declaration, governors are encouraged to request a declaration even when they request a declaration even when they have the resources to deal with the have the resources to deal with the disaster themselves, and presidents may disaster themselves, and presidents may choose to issue a declaration for political choose to issue a declaration for political reasons (Sylves, 1996: 34-35).reasons (Sylves, 1996: 34-35).


► Presidents and governors cannot afford to Presidents and governors cannot afford to appear insensitive to the plight of disaster appear insensitive to the plight of disaster victims, particularly if there is a great deal of victims, particularly if there is a great deal of media coverage and/or the victims are children, media coverage and/or the victims are children, the elderly, or other groups that might draw the elderly, or other groups that might draw public sympathy.public sympathy.

► James Lee Witt,James Lee Witt, the director of FEMA during the director of FEMA during the Clinton Administration, has sought the the Clinton Administration, has sought the adoption of objective criteria for the issuance of adoption of objective criteria for the issuance of presidential disaster declarations, to reduce presidential disaster declarations, to reduce political pressure for declarations, and to political pressure for declarations, and to encourage state and local governments to invest encourage state and local governments to invest more in mitigation programs to reduce losses.more in mitigation programs to reduce losses.


► The FEMA budget is relatively small, given The FEMA budget is relatively small, given that the agency has only about 2,600 full-that the agency has only about 2,600 full-time employees. time employees.

► Since 2003, FEMA has been a part of the Since 2003, FEMA has been a part of the Department of Homeland Security and its Department of Homeland Security and its budget has been subject to departmental budget has been subject to departmental review. The budget shrank between 2003 review. The budget shrank between 2003 and 2005 and has been at least partially and 2005 and has been at least partially restored because of congressional action restored because of congressional action after the poor response to the Hurricane after the poor response to the Hurricane Katrina disaster. Katrina disaster.


► Funding for FEMA’s activities comes Funding for FEMA’s activities comes from three sources:from three sources:

regular regular budget appropriationsbudget appropriations for for the year;the year;

the the President’s Disaster Relief President’s Disaster Relief Fund;Fund; and and

supplemental appropriationssupplemental appropriations for for particular disasters (Sylves, 1996: 38-particular disasters (Sylves, 1996: 38-39).39).

State and local funding State and local funding

► State and local governments receive some State and local governments receive some of FEMA’s regular budget through training of FEMA’s regular budget through training and technical assistance programs.and technical assistance programs.

► State and local governments, other federal State and local governments, other federal agencies, and other disaster organizations agencies, and other disaster organizations (through contracts and other (through contracts and other arrangements) receive large portions of the arrangements) receive large portions of the President’s Disaster Relief Fund monies and President’s Disaster Relief Fund monies and the supplemental appropriations.the supplemental appropriations.

Federal fundingFederal funding

► A presidential disaster declaration provides A presidential disaster declaration provides funding for the mobilization of FEMA’s reserve of funding for the mobilization of FEMA’s reserve of temporary employees so that disaster temporary employees so that disaster application centers and other disaster response application centers and other disaster response and recovery activities can be staffed.and recovery activities can be staffed.

► Typically, FEMA and other federal agencies give Typically, FEMA and other federal agencies give high estimates of the costs of catastrophic high estimates of the costs of catastrophic disasters to ensure that there is sufficient disasters to ensure that there is sufficient funding to support whatever needs may arise. funding to support whatever needs may arise. The supplemental appropriations provide The supplemental appropriations provide flexibility for investing in mitigation and other flexibility for investing in mitigation and other essential activities that the agencies cannot essential activities that the agencies cannot support with their regular budget appropriations. support with their regular budget appropriations.


► In summary, the disaster funding process In summary, the disaster funding process encourages state and local officials to ask encourages state and local officials to ask for more than they need to ensure for more than they need to ensure recovery, and encourages federal officials recovery, and encourages federal officials to provide disaster assistance even when it to provide disaster assistance even when it may not be needed (Sylves, 1996).may not be needed (Sylves, 1996).

► The most obvious alternative to public The most obvious alternative to public funding of disaster response and recovery funding of disaster response and recovery is to force individuals and communities to is to force individuals and communities to assume more responsibility for their own assume more responsibility for their own health and safety.health and safety.


► The question, however, is just how The question, however, is just how much responsibility they should much responsibility they should bear. Should there be, as FEMA bear. Should there be, as FEMA officials have suggested, a clear officials have suggested, a clear threshold for federal disaster threshold for federal disaster assistance (i.e., clear criteria for the assistance (i.e., clear criteria for the issuance of a presidential disaster issuance of a presidential disaster declaration and the declaration of a declaration and the declaration of a lesser emergency)?lesser emergency)?


► 1. Why is it difficult to deny a presidential 1. Why is it difficult to deny a presidential disaster declaration or other disaster disaster declaration or other disaster assistance?assistance?

► 2. Why would it be easier to have clearly 2. Why would it be easier to have clearly defined criteria for the issuance of a defined criteria for the issuance of a presidential disaster declaration?presidential disaster declaration?

► 3. Why are FEMA and other disaster 3. Why are FEMA and other disaster agencies dependent upon the supplemental agencies dependent upon the supplemental appropriations for disasters?appropriations for disasters?

Earthquake insuranceEarthquake insurance

► Insurance is a means of compensating property Insurance is a means of compensating property owners for their economic losses during a owners for their economic losses during a disaster. disaster.

►When communities join the When communities join the National Flood National Flood Insurance ProgramInsurance Program (NFIP), they are required (NFIP), they are required to implement flood mitigation programs in order to implement flood mitigation programs in order for residents to be eligible for disaster for residents to be eligible for disaster assistance. The cost of flood insurance is based assistance. The cost of flood insurance is based upon the community’s rating or score for upon the community’s rating or score for mitigation programs (see Session No. 10 on mitigation programs (see Session No. 10 on NFIP).NFIP).

► Property insurance policies typically cover wind Property insurance policies typically cover wind and fire damage, but may not cover other kinds and fire damage, but may not cover other kinds of disaster-related damage.of disaster-related damage.


► In California, where there is a significant risk In California, where there is a significant risk of earthquakes, only about 175 insurance of earthquakes, only about 175 insurance companies provide insurance coverage for companies provide insurance coverage for such disasters out of approximately 800 such disasters out of approximately 800 firms offering property/casualty insurance firms offering property/casualty insurance (Roth, 1997: 2-3). (Roth, 1997: 2-3).

► V. Small firms cannot afford to offer V. Small firms cannot afford to offer earthquake insurance because of the risk of earthquake insurance because of the risk of a catastrophic seismic event (Roth, 1997: 2-a catastrophic seismic event (Roth, 1997: 2-3).3).


► In order to understand the disaster insurance issue, In order to understand the disaster insurance issue, some terminology should be understood (Roth, 1997: some terminology should be understood (Roth, 1997: 3-7):3-7):

► A. LossA. Loss—”the amount paid for an individual claim or —”the amount paid for an individual claim or the aggregate of all payments in one earthquake the aggregate of all payments in one earthquake event” (page 3);event” (page 3);

► B. ClaimB. Claim—the amount that a policyholder is seeking —the amount that a policyholder is seeking to compensate for injury, damage, or other losses; to compensate for injury, damage, or other losses;

► C. PerilC. Peril—”the damage-causing event” (page 3); —”the damage-causing event” (page 3); ►

► D. HazardD. Hazard—condition or situation that makes the —condition or situation that makes the damage worse, e.g., failure to bolt a house to its damage worse, e.g., failure to bolt a house to its foundation; foundation;

Earthquake insuranceEarthquake insurance► E. Adverse selectionE. Adverse selection—those with the greater risk are more —those with the greater risk are more

likely to buy or try to buy insurance (rather than those with likely to buy or try to buy insurance (rather than those with comparatively less risk);comparatively less risk);

► F. RatingF. Rating—the setting of a rate or cost for a particular —the setting of a rate or cost for a particular policyholder, based on the level of risk;policyholder, based on the level of risk;

► G. UnderwritingG. Underwriting—process of determining whether to insure —process of determining whether to insure the property based on the risk, the coverage, and the price;the property based on the risk, the coverage, and the price;

► H. DeductiblesH. Deductibles—the losses that the policyholder assumes —the losses that the policyholder assumes before the insurance company is obliged to pay the claim;before the insurance company is obliged to pay the claim;

► I. Probable maximum lossI. Probable maximum loss (PML)—estimate of the largest (PML)—estimate of the largest loss or payout that an insurance company might be obliged to loss or payout that an insurance company might be obliged to pay (which is compared with the company’s financial pay (which is compared with the company’s financial reserves, reinsurance, and other resources that can be used reserves, reinsurance, and other resources that can be used to pay claims);to pay claims);

Earthquake insuranceEarthquake insurance► J. Capacity—J. Capacity—the maximum amount of exposure or potential the maximum amount of exposure or potential

losses that an insurance company is willing to assume;losses that an insurance company is willing to assume;► K. ReservesK. Reserves—amounts of money or assets that an insurance —amounts of money or assets that an insurance

company has set aside to cover claims;company has set aside to cover claims;► L. Policyholder surplusL. Policyholder surplus—”the insurance company’s assets —”the insurance company’s assets

minus the liabilities” or what would be left to cover claims minus the liabilities” or what would be left to cover claims from a catastrophic disaster (page 6);from a catastrophic disaster (page 6);

► M. ReinsuranceM. Reinsurance—the insurance an insurance company buys —the insurance an insurance company buys to cover some of its risk from claims (for extraordinary losses to cover some of its risk from claims (for extraordinary losses or simply for that portion of the risk that the first company or simply for that portion of the risk that the first company does not want to accept);does not want to accept);

► L. Multiple peril/multiple lineL. Multiple peril/multiple line—common type of insurance —common type of insurance that covers a variety of perils (as opposed to fire insurance that covers a variety of perils (as opposed to fire insurance and other one-peril types of insurance that used be to be and other one-peril types of insurance that used be to be sold). sold).


► Flood insurance is available because it is Flood insurance is available because it is subsidized by the U.S. federal government. subsidized by the U.S. federal government. A catastrophic flooding event could easily A catastrophic flooding event could easily bankrupt small insurance companies that bankrupt small insurance companies that have a large number of policyholders have a large number of policyholders making claims, because the companies making claims, because the companies would lack the reserves to cover would lack the reserves to cover extraordinarily large payouts. extraordinarily large payouts.

► The scarcity of earthquake insurance in The scarcity of earthquake insurance in California and other states with a significant California and other states with a significant seismic risk (or peril) is due to the potential seismic risk (or peril) is due to the potential of insurance companies to be financially of insurance companies to be financially overwhelmed by a catastrophic event.overwhelmed by a catastrophic event.


► The scarcity of earthquake insurance in California The scarcity of earthquake insurance in California and other states with a significant seismic risk (or and other states with a significant seismic risk (or peril) is due to the potential of insurance companies peril) is due to the potential of insurance companies to be financially overwhelmed by a catastrophic to be financially overwhelmed by a catastrophic event.event.

► The insurance industry operates on the The insurance industry operates on the “Law of “Law of Large Numbers,”Large Numbers,” meaning that, if a large meaning that, if a large numbers of policies are sold, the probability of all or numbers of policies are sold, the probability of all or a very large number of the policyholders making a very large number of the policyholders making claims is relatively small and the insurers can take claims is relatively small and the insurers can take in more money than they pay out in claims (Roth, in more money than they pay out in claims (Roth, 1997: 7; also see Kunreuther, 1998b). 1997: 7; also see Kunreuther, 1998b).


► Relatively predictable events and the geographic Relatively predictable events and the geographic dispersion of policyholders (so all are not involved dispersion of policyholders (so all are not involved in the same events) makes it easier for insurance in the same events) makes it easier for insurance companies to estimate their exposure and to companies to estimate their exposure and to determine how much risk they are willing to accept determine how much risk they are willing to accept (Roth, 1997: 7; also see Kunreuther, 1998).(Roth, 1997: 7; also see Kunreuther, 1998).

► To assist insurance companies in California in the To assist insurance companies in California in the estimation of risk, the California Insurance estimation of risk, the California Insurance Department has divided the state into eight Department has divided the state into eight earthquake zones (A through H) based upon earthquake zones (A through H) based upon probable seismic activity. An insurance company probable seismic activity. An insurance company can distribute its coverage among the zones and can distribute its coverage among the zones and reduce the likelihood that one event will result in reduce the likelihood that one event will result in more than one eighth of its policyholders making more than one eighth of its policyholders making claims (Roth, 1997: 7-8).claims (Roth, 1997: 7-8).


►An insurance company’s exposure will An insurance company’s exposure will be reduced bybe reduced by

►A. reinsurance, A. reinsurance, ►B. a high deductible for policyholders, B. a high deductible for policyholders,

and/orand/or►C. the encouragement of mitigation C. the encouragement of mitigation

measures to reduce the risk to measures to reduce the risk to individual properties (Kunreuther, individual properties (Kunreuther, 1998).1998).


►Earthquake insurance policies Earthquake insurance policies generally cover losses fromgenerally cover losses from

►A. structural damage,A. structural damage,►B. damage to the structure’s B. damage to the structure’s

contents, andcontents, and►C. loss of use or income (Roth, 1997: C. loss of use or income (Roth, 1997:

8).8).


► Earthquake insurance typically covers only damage Earthquake insurance typically covers only damage from shaking, not fire damage (which is covered by from shaking, not fire damage (which is covered by standard fire policies), vehicle damage (which is standard fire policies), vehicle damage (which is covered by automobile insurance), and other effects covered by automobile insurance), and other effects of seismic events which are covered by other lines of seismic events which are covered by other lines of insurance (Roth, 1997: 9; and 1998).of insurance (Roth, 1997: 9; and 1998).

► Following the Northridge Earthquake in 1994, Following the Northridge Earthquake in 1994, insurance companies stopped offering new or insurance companies stopped offering new or renewing old residential earthquake insurance renewing old residential earthquake insurance policies. As a result, the state created the policies. As a result, the state created the California Earthquake AuthorityCalifornia Earthquake Authority (CEA) to provide (CEA) to provide coverage, with private insurers administering the coverage, with private insurers administering the policies, settling claims, etc. (Roth, 1997: 11).policies, settling claims, etc. (Roth, 1997: 11).

Earthquake insuranceEarthquake insurance► Under CEA, earthquake policies do not cover all property (e.g., Under CEA, earthquake policies do not cover all property (e.g.,

they do not cover swimming pools, patios, or garages), have they do not cover swimming pools, patios, or garages), have high deductibles (15 percent), cover only $5,000 of the high deductibles (15 percent), cover only $5,000 of the contents of homes, and provide only up to $1,500 in living contents of homes, and provide only up to $1,500 in living expenses following a disaster (Roth, 1997: 11).expenses following a disaster (Roth, 1997: 11).

► If a large number of policyholders participate and there are If a large number of policyholders participate and there are no, or only a few, large earthquakes for a period of time, no, or only a few, large earthquakes for a period of time, funds may be available in the event of a catastrophic funds may be available in the event of a catastrophic earthquake in the future (Roth, 1997: 11). earthquake in the future (Roth, 1997: 11).

► By contrast, the By contrast, the Florida Hurricane Catastrophe Fund,Florida Hurricane Catastrophe Fund, which was created in 1993 after the devastation of Hurricane which was created in 1993 after the devastation of Hurricane Andrew, provides a buffer for insurers by providing additional Andrew, provides a buffer for insurers by providing additional emergency reserves (Lecomte and Gahagan, 1998).emergency reserves (Lecomte and Gahagan, 1998).

Earthquake insuranceEarthquake insurance► Another major issue is how to ensure that insurance Another major issue is how to ensure that insurance

companies get an accurate measure of the level of companies get an accurate measure of the level of risk so that they can determine their capacities and risk so that they can determine their capacities and set rates appropriately to cover claims. set rates appropriately to cover claims.

► The adoption and effective enforcement of The adoption and effective enforcement of appropriate building codes would ensure that appropriate building codes would ensure that estimates of risk are more accurate. However, while estimates of risk are more accurate. However, while California has strict building codes and land-use California has strict building codes and land-use regulations, many states do not. regulations, many states do not.

► For example, the path of destruction that Hurricane For example, the path of destruction that Hurricane Andrew left across south Florida demonstrated that, Andrew left across south Florida demonstrated that, while strict building codes were in place, enforcement while strict building codes were in place, enforcement had been so lax in some communities that many had been so lax in some communities that many structures were much more vulnerable to high winds structures were much more vulnerable to high winds than they should have been (IIPLR, 1995). than they should have been (IIPLR, 1995).


► The encouragement of effective mitigation The encouragement of effective mitigation measures will also reduce the exposure of measures will also reduce the exposure of insurers and give them more accurate insurers and give them more accurate measures of their risk.measures of their risk.

► Therefore, insurance companies have a Therefore, insurance companies have a vested interest in the adoption of appropriate vested interest in the adoption of appropriate building codes and their effective building codes and their effective enforcement. enforcement.

► A reliance upon private insurance for recovery A reliance upon private insurance for recovery does raise serious questions, however. does raise serious questions, however.

► For example, will insurance cover enough of For example, will insurance cover enough of the losses from a disaster to ensure a the losses from a disaster to ensure a reasonably speedy recovery? reasonably speedy recovery?


► Less affluent members of the community are less Less affluent members of the community are less likely to have insurance coverage.likely to have insurance coverage.

► The processing of insurance claims may be a slow The processing of insurance claims may be a slow process, particularly when the disaster is very large process, particularly when the disaster is very large and companies have large numbers of policyholders and companies have large numbers of policyholders in the area with which to deal.in the area with which to deal.

► As Howard Kunreuther (1998b: 19) points out, As Howard Kunreuther (1998b: 19) points out, insurance is a less viable recovery option following insurance is a less viable recovery option following very large disasters because “Great” earthquakes, very large disasters because “Great” earthquakes, fires, and other disasters have destroyed large fires, and other disasters have destroyed large cities and outstripped the resources of insurance cities and outstripped the resources of insurance companies. Hurricane Andrew in 1992 caused nine companies. Hurricane Andrew in 1992 caused nine insurers to fail (Kunreuther, 1998a: 4-5). insurers to fail (Kunreuther, 1998a: 4-5).

Earthquake insuranceEarthquake insurance► Private insurers can set rates high enough to cover Private insurers can set rates high enough to cover

almost any losses, but the cost may be so high that almost any losses, but the cost may be so high that only the most affluent property owners can afford only the most affluent property owners can afford coverage and they may well choose to accept the risk coverage and they may well choose to accept the risk of loss rather than pay high premiums. of loss rather than pay high premiums.

► Similarly, high deductibles or limits on coverage may Similarly, high deductibles or limits on coverage may reduce the potential losses to insurers and force reduce the potential losses to insurers and force policyholders to share the risk from catastrophic policyholders to share the risk from catastrophic events. But, again, property owners may well choose events. But, again, property owners may well choose to accept the risk of property loss and not the high to accept the risk of property loss and not the high insurance costs. insurance costs.

► Also, uncertainty in threat analysis and political inertia Also, uncertainty in threat analysis and political inertia can cause the earthquake hazard and risk to go can cause the earthquake hazard and risk to go relatively unmitigated (such as the uncertainty about relatively unmitigated (such as the uncertainty about the level of earthquake risk in the eastern U.S.).the level of earthquake risk in the eastern U.S.).


► However, a catastrophe may be so great that it However, a catastrophe may be so great that it overwhelms the reinsurance companies overwhelms the reinsurance companies themselves. That was the experience with flood themselves. That was the experience with flood losses that encouraged the creation of the losses that encouraged the creation of the National Flood Insurance Program in 1968. National Flood Insurance Program in 1968.

► The NFI Reform Act of 1994 created a rating The NFI Reform Act of 1994 created a rating system for setting premiums, with points for system for setting premiums, with points for specific mitigation measures. specific mitigation measures.

► The 1994 act also created the The 1994 act also created the Flood Flood Mitigation Assistance Grant ProgramMitigation Assistance Grant Program to to encourage broader hazard reduction efforts encourage broader hazard reduction efforts (Pasterick, 1998). (Pasterick, 1998).


► A major issue in the earthquake insurance debate is A major issue in the earthquake insurance debate is whether property owners will voluntarily purchase whether property owners will voluntarily purchase insurance, particularly if they do not live in a high insurance, particularly if they do not live in a high risk area. The experience with flood insurance is risk area. The experience with flood insurance is that they will not (Cigler, 1990; Kunreuther, 1998a: that they will not (Cigler, 1990; Kunreuther, 1998a: 12).12).

► In general, property owners tend to purchase In general, property owners tend to purchase earthquake insurance if both the risk of an event earthquake insurance if both the risk of an event and the possibility of severe damage are high and the possibility of severe damage are high (Palm, 1998: 56-61). (Palm, 1998: 56-61).

► It is possible that private insurance, with or without It is possible that private insurance, with or without government backing, will encourage risk-taking by government backing, will encourage risk-taking by property owners? property owners?


► If property owners find themselves If property owners find themselves protected against severe losses, they protected against severe losses, they may feel little pressure to reduce the may feel little pressure to reduce the level of risk to their property. level of risk to their property. Conversely, if property owners face Conversely, if property owners face significant economic risk themselves, significant economic risk themselves, they may be encouraged to invest in they may be encouraged to invest in mitigation measures to reduce their mitigation measures to reduce their own exposure own exposure


►Howard Kunreuther concludes that “... an Howard Kunreuther concludes that “... an insurance system with rates based on risk can insurance system with rates based on risk can serve as the cornerstone of a hazard serve as the cornerstone of a hazard management program” (1998a: 3), and he management program” (1998a: 3), and he advocates advocates

► A. a system of monetary incentives for A. a system of monetary incentives for property owners to reduce risk to their own property owners to reduce risk to their own property, property,

► B. fines for noncompliance, B. fines for noncompliance, ► C. tax credits to encourage mitigation C. tax credits to encourage mitigation

measures, such as, appropriate and strictly measures, such as, appropriate and strictly enforced building codes, and enforced building codes, and

►D. effective land-use regulations (p. 4).D. effective land-use regulations (p. 4).


►Governments frequently suffer serious Governments frequently suffer serious property losses during disasters, and property losses during disasters, and they are often self-insured. they are often self-insured.

►Local governments usually pay for Local governments usually pay for losses from their general funds or losses from their general funds or issue bonds against future revenue to issue bonds against future revenue to raise monies for emergencies. Thus, raise monies for emergencies. Thus, they are also heavily dependent upon they are also heavily dependent upon federal disaster assistance programs.federal disaster assistance programs.


► To ensure that there is earthquake insurance To ensure that there is earthquake insurance available, the insurance industry needsavailable, the insurance industry needs

► A. more accurate estimates of risk and the A. more accurate estimates of risk and the vulnerability of property, vulnerability of property,

► B. appropriate and strictly enforced building B. appropriate and strictly enforced building codes, codes,

► C. economic incentives for property owners, C. economic incentives for property owners, including governments, to mitigate hazards, including governments, to mitigate hazards, and and

►D. increased efforts to share risk through D. increased efforts to share risk through insurance pools, reinsurance, and other insurance pools, reinsurance, and other measures (Kunreuther, 1998c). measures (Kunreuther, 1998c).


► Property owners are more likely to reduce Property owners are more likely to reduce their own exposure if they understand the risk.their own exposure if they understand the risk.

► Lending institutions that hold mortgages on Lending institutions that hold mortgages on property are more likely to encourage property are more likely to encourage mitigation measures if they understand the mitigation measures if they understand the risk.risk.

► The insurance industry has been active in The insurance industry has been active in promoting mitigation programs, includingpromoting mitigation programs, including

► A. a broadened definition of building codes to A. a broadened definition of building codes to include protection of property (not just include protection of property (not just personal safety);personal safety);


►B. statewide building codes to assure B. statewide building codes to assure more consistency, easier enforcement, more consistency, easier enforcement, and easier compliance;and easier compliance;

►C. more involvement by insurance C. more involvement by insurance companies in code development;companies in code development;

►D. an accepted minimum national D. an accepted minimum national building standard;building standard;

►E. an expansion of the use of E. an expansion of the use of prescriptive codes (standards that must prescriptive codes (standards that must be met);be met);


► F. a “two-tiered code” indicating structures F. a “two-tiered code” indicating structures meet minimum standards meet minimum standards oror a higher a higher standard;standard;

►G. a system for grading code enforcement G. a system for grading code enforcement and tying it to insurance rates;and tying it to insurance rates;

►H. minimum standards for plan review;H. minimum standards for plan review;► I. a public education program on the I. a public education program on the

importance of building codes and effective importance of building codes and effective enforcement;enforcement;

► J. retrofitting of existing structures;J. retrofitting of existing structures;


► K. a public education program on the risk K. a public education program on the risk from natural hazards;from natural hazards;

► L. professional education and training for L. professional education and training for builders and government regulators;builders and government regulators;

►M. more communication among engineers, M. more communication among engineers, architects, and other building professions;architects, and other building professions;

►N. financial incentives to adopt new and N. financial incentives to adopt new and better codes; andbetter codes; and

►O. “multi-hazard” approaches for mitigation O. “multi-hazard” approaches for mitigation programs (NCPI, 1993, cited in Petak, 1998; programs (NCPI, 1993, cited in Petak, 1998; and IILPR, 1995: 34-36).and IILPR, 1995: 34-36).

Disaster insuranceDisaster insurance► Another issue that is being raised is whether the federal Another issue that is being raised is whether the federal

government should help create a disaster insurance program, government should help create a disaster insurance program, like the flood insurance program, to cover earthquakes, like the flood insurance program, to cover earthquakes, hurricanes, and other catastrophic disasters. The arguments hurricanes, and other catastrophic disasters. The arguments for such a program arefor such a program are

► A. that the federal government is the only entity that has the A. that the federal government is the only entity that has the resources necessary to provide reinsurance for catastrophic resources necessary to provide reinsurance for catastrophic disasters;disasters;

► B. that a national approach is consistent with the “Law of B. that a national approach is consistent with the “Law of Large Numbers” and the risk can be shared among the many Large Numbers” and the risk can be shared among the many communities and states in the nation; andcommunities and states in the nation; and

► C. that a national program can encourage the same kinds of C. that a national program can encourage the same kinds of mitigation efforts that the NFIP requires and thus overcome mitigation efforts that the NFIP requires and thus overcome the reluctance of communities to regulate building codes and the reluctance of communities to regulate building codes and land-uses effectively.land-uses effectively.

Disaster insuranceDisaster insurance► . The arguments against an “all-hazards” national . The arguments against an “all-hazards” national

disaster insurance are thatdisaster insurance are that► A. the risk of catastrophic disaster is not shared A. the risk of catastrophic disaster is not shared

nationally, but is much greater in a few states, most nationally, but is much greater in a few states, most notably California, Florida, and Texas; notably California, Florida, and Texas;

► B. there is already adequate insurance coverage for B. there is already adequate insurance coverage for most natural and technological disasters, without most natural and technological disasters, without creating a broader category of insurance;creating a broader category of insurance;

► C. the availability of disaster insurance may C. the availability of disaster insurance may encourage more risk-taking because property owners encourage more risk-taking because property owners will come to expect coverage for all their losses; andwill come to expect coverage for all their losses; and

► D. such a program might interfere with state and D. such a program might interfere with state and local prerogatives in land-use regulation and building local prerogatives in land-use regulation and building codes (for which some criticize the NFIP).codes (for which some criticize the NFIP).

Disaster insuranceDisaster insurance

►An alternative is to create a federal An alternative is to create a federal reinsurance program to back the state reinsurance program to back the state reinsurance programs in Florida, reinsurance programs in Florida, California, Hawaii and elsewhere California, Hawaii and elsewhere (Eckstrom, 1997).(Eckstrom, 1997).


►1. How do insurance companies deal 1. How do insurance companies deal with catastrophic disasters?with catastrophic disasters?

►2. Why is earthquake insurance 2. Why is earthquake insurance difficult to find in California?difficult to find in California?

►3. Why is it recommended that the 3. Why is it recommended that the federal government back earthquake federal government back earthquake (and possibly disaster) insurance?(and possibly disaster) insurance?


►4. What are the major criticisms of “all-4. What are the major criticisms of “all-hazards” disaster insurance?hazards” disaster insurance?

►5. What is the “law of large numbers” 5. What is the “law of large numbers” and why is it important to the insurance and why is it important to the insurance industry?industry?

►6. Why is the insurance industry 6. Why is the insurance industry interested in building codes?interested in building codes?

►7. How does the Florida Hurricane 7. How does the Florida Hurricane Catastrophe Fund help insurance Catastrophe Fund help insurance companiescompanies

session 8 paying for large- scale disasters public administration and emergency management

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public funding

public trough

public authorities

public affairs

public agencies

public sector budget

public policies henry

federal funding process