Study Quantifies Earthquake Costs

FEMA Uses New Methodology

Most people already know that earthquakes can cause huge losses, both financially and in terms of property and lives, in many regions of the United States.

Now, perhaps for the first time, people have some idea of exactly how much loss is possible.

A new study by the Federal Emergency Management Agency, released this fall at the National Earthquake Risk Management Conference in Seattle, attempted to quantify and define the potential extent of earthquake damage.

The study used new methodology, and marked the first time earthquake risk and future losses were estimated by geographic area.

The numbers: Losses of up to an estimated $4.4 billion, which includes only capital losses (repairing or replacing buildings, contents and inventory) and income losses.

That figure does not cover damage and losses to critical facilities, transportation and utility lifelines or indirect economic loss.

Also, officials call the figures of expected loss "extremely conservative."

Earthquake losses were annualized, officials said, to factor in historic patterns of frequent smaller earthquake events with infrequent but larger events.

Image Caption

Annualized earthquake losses at the state level.

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Most people already know that earthquakes can cause huge losses, both financially and in terms of property and lives, in many regions of the United States.

Now, perhaps for the first time, people have some idea of exactly how much loss is possible.

A new study by the Federal Emergency Management Agency, released this fall at the National Earthquake Risk Management Conference in Seattle, attempted to quantify and define the potential extent of earthquake damage.

The study used new methodology, and marked the first time earthquake risk and future losses were estimated by geographic area.

The numbers: Losses of up to an estimated $4.4 billion, which includes only capital losses (repairing or replacing buildings, contents and inventory) and income losses.

That figure does not cover damage and losses to critical facilities, transportation and utility lifelines or indirect economic loss.

Also, officials call the figures of expected loss "extremely conservative."

Earthquake losses were annualized, officials said, to factor in historic patterns of frequent smaller earthquake events with infrequent but larger events.

The result was a comprehensive look at risk across the country.

"What we've had in the past were simply localized predictions of maximum probable loss, as offered by the insurance industry," said Stuart Nishenko, senior seismologist at FEMA in Washington, D.C.

"Now, for the first time, we have a standardized national picture of earthquake risk throughout the country."

At Risk Regions

Not surprisingly, the U.S. West Coast is officially the country's most at-risk region; California, Oregon and Washington account for 84 percent of the expected annual losses, with California alone accounting for $3.3 billion of the estimated damage costs.

Other relatively high earthquake-loss ratios exist throughout the western United States, the central states within the New Madrid Seismic Zone, and the area around Charleston, S.C.

Historically, earthquakes happen, and people react as best they can. The purpose of this study, Nishenko said, is to provide a standard methodology for ascertaining risk, so that people can take proactive measures.

"This earthquake loss estimation system is the first of its kind in that its methodology utilizes probability factors rather than depending on actual historical data alone to estimate future losses from earthquakes," said FEMA director James Lee Witt. "Understanding earthquake risk is basic to making informed decisions on mitigation policies, priorities and strategies, in both the public and private sectors."

Witt maintains that understanding the scope and complexity of potential earthquake damage in a community provides the foundation for planning, zoning, building codes and regulating development in a way to reduce earthquake risk.

The study distinguishes between earthquake hazard, which has been relatively constant, from earthquake risk, which has increased significantly. This is due primarily to two factors:

  • The rapid growth in urban areas prone to earthquakes.
  • The vulnerability of older building stock that were constructed over the past 20 years without earthquake safeguards.

The study shows that there are many low hazard but also high risk problem areas throughout the country, especially in major cities such as New York and Boston -- densely populated areas where the infrequency of damaging earthquakes have been previously and mistakenly taken to mean lack of risk.

Other cities ranked among the high-loss potential urban areas included Seattle, Portland (Ore.), Salt Lake City, St. Louis, Las Vegas, Anchorage, Memphis, Newark, Honolulu and Atlanta.

In terms of vulnerability, the above cities were all cited, as well as others rarely thought of in terms of earthquake potential, such as Philadelphia.

New Methodology

To arrive at their findings, FEMA building scientists and seismologists used an earthquake loss estimation methodology called Hazards U.S. (HAZUS), developed by the agency in cooperation with the National Institute of Building Sciences.

HAZUS technology uses an integrated Geographic Information System (GIS) platform that produces regional profiles and estimates of earthquake loss by geographic area, and addresses the built environment and categories of losses in a comprehensive manner.

This computer-based methodology incorporates probabilistic seismic hazard data provided by the U.S. Geological Survey as a set of 18-20 intensity-probability pairs for each of the approximately 150,000 grid points used to cover the entire United States.

It uses mathematical formulas as well as information about local building inventories, geological conditions, economic data, location and size of potential earthquakes, and other data to estimate losses. The system can specify areas of potential or actually damage and degree of damage in areas as small as the census track level based on the magnitude of the seismic activity and information that has been input into the system on building inventory.

The coordination of the work of many agencies and organizations means, Nishenko said, "a standardization on how we report and describe risks, as well as a consensus in how we interpret trends in hazards."

Next on the horizon, Nishenko added, is the integration of earthquake risk data with that from floods and hurricanes.

"Annual earthquake losses in the U.S. are running almost neck and neck with those from floods and hurricanes," Nishenko said. "Earthquakes may happen less frequently, but they often occur with more severity."

According to the National Weather Service, annual flood losses totaled $5.2 billion during 1989 to 1998. And, also according to the NWS, the National Climatic Data Center estimates $5.4 billion in annual hurricane losses for the period.

"The study strengthens the argument that communities should upgrade their present building stock to deal with current risks," Nishenko said, "as well as the motivation to adapt and enforce building codes to reduce future risks."

To aid in this endeavor, FEMA has initiated a program called Project Impact for the purpose of fostering private-public partnerships to encourage public outreach, mentoring and mitigation projects that implement disaster damage prevention measures.

The full report, "HAZUS 99: Average Annual Earthquake Losses for the United States," is available on FEMA's Web site

. Hard copies are free and can be obtained by calling FEMA publications at 1-800-480-2520.

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