How will Hurricane Sandy rank in severity, for example, compared with
Hurricane Irene? A number of estimates are already appearing and estimates
of insured losses have been growing beyond the first estimate of $10 billion,
which would imply a total cost of approximately $25 billion using a rule of thumb described below.
In 2011, Hurricane Irene was described as
being the fifth-costliest hurricane in U.S. history. I didn't believe it,
and I
checked it out. This number should not be used. Hurricane Irene does not even rank among the ten most costly. A dollar ranking that does not adjust for inflation is
just not useful.
The
suggestion has already been made that Hurricane Sandy will be the
costliest East Coast hurricane ever. Some superlatives have been used:
-
The MTA says Sandy is its worst
disaster ever because of the corrosive nature of the salt water from floods on
its tracks.
-
Con Ed says this its
worst disaster ever.
-
On Long
Island , 90 percent of LIPA customers are without power.
-
The Wall Street Journal posted satellite photos showing Sandy is larger than
Irene.
-
The WSJ
concludes that Sandy
will cost more than its estimate of a $15 billion cost for Irene. NY Governor
Cuomo has observed that the cost of Irene was mostly upstate, whereas the cost
of Sandy is
downstate.
Prospective Measures of Severity
The significance of an oncoming storm is now estimated by meteorologists based on wind-speed categories and barometric pressure. The two measures are
interrelated and point to likely wind speeds. The public needs also an indicator of the likely economic impact of flooding.
1. Five Wind-Speed Categories. A Category 1 hurricane means wind speeds of 74-95 mph on
the Saffir/Simpson
Hurricane Scale. The categories
go up to 5 for wind speeds above 155 mph. Hurricane Irene petered out on its
way north. The warm air carried by Hurricane Sandy on its way north met another
storm with cold air from the northwest.
2. Millibars - Barometric Pressure. The Christian
Science Monitor has posted a lucid summary of the importance of
this measure of hurricane severity. (It also repeats the error cited above
about the cost of Hurricane Irene - I will return to this.) Ordinarily, the
barometric pressure is related to wind speed. The normal sea-level barometric
pressure is 1013.5. During a hurricane the eye of the storm shows the lowest
barometric pressure. The lower the pressure, the higher the winds. During the
afternoon before Sandy
hit landfall, the barometric pressure at its eye fell from 943 to 940, which is
a level associated with Category 3 or Category 4 winds. The lowest barometric
pressure that has been measured in a U.S. hurricane is 882 for Hurricane
Wilma. Hurricane Carla was the tenth-lowest, 931. The National Hurricane
Center list of the most
intense Atlantic hurricanes does not follow the Millibars ranking exactly,
since Katrina and Wilma are not in the order one would expect.
Ten Windiest (“Most Intense”) Hurricanes
Name (after 1953) or Location
|
Year
|
Category
|
Millibars
|
1.
|
1935
|
5
|
892
|
2.Camille
|
1969
|
5
|
909
|
3.Katrina
|
2005
|
3
|
920
|
4.Andrew
|
1992
|
5
|
922
|
5.
|
1886
|
4
|
925
|
6.Keys,
FL
|
1919
|
4
|
927
|
7.
|
1928
|
4
|
929
|
8.Donna
|
1960
|
4
|
930
|
8.
|
1926
|
4
|
931
|
10.Carla
|
1961
|
4
|
931
|
Notes: Wind Category is at Landfall. Category 5 on the
Saffir/Simpson scale means 155 mph winds for at least one minute. Category 4
means 131-154 mph for at least one minute. Category 3 means 111-130 mph for at
least one minute. Millibars are mercury readings for barometric pressure.
Source: Based on NOAA, National Weather Service, National Hurricane
Center , Blake and Gibney, 2011.
3. Flood Surge Impact. However,
most of the damage is caused by the delayed impact of the flooding surge (the
hurricane equivalent of a post-earthquake tsunami). We need a new indicator of
likely flood damage, which would have to take into account the economic value
of property in the track of the hurricane, the sea level of the land, and the
size of the expected surge. The Flood Surge Impact index could take into
account the timing of the tides – Hurricane Sandy hit landfall near high tide
and the full moon added to the height of the tide and therefore to the surge. The
geography of the surge was important in the case of New
York City because the surge came from two directions – down the Connecticut coastline through the Long Island Sound and northward
through the funnel of New York
Harbor .
Retrospective Measures of Cost
There are at least six basic ways
to measure or adjust the cost of a hurricane. They overlap:
1. Loss of Life, or Injury. While every life is precious, on the simple measure of number of
lives lost to a hurricane, Hurricane Irene's 24 lives lost did not even rank among the 100 most
costly hurricanes. Preparedness is much better than it used to be, and evacuation is widely recommended. Mayor Bloomberg has made clear that the
overriding priority of the City of NY is to avoid loss of life among residents and emergency workers. The mayor has taken a scientific approach to evacuation based on flood
probability maps that use feet above sea level a proximity to water to create three evacuation zones. These maps proved highly predictive. Also contributing to reduced fatalities is the steady
improvement in (a) U.S. Government warning systems via NOAA and its National Weather Service
and National Hurricane Center ,
and (b) the FEMA network of state notification and assistance. Loss of life
can be converted to a dollar figure via life insurance losses or a value that
economists impute to a person's remaining working life. Injuries also represent
a cost either to the individual or to health insurance plans (private or
governmental), and injuries that result in a disability have a working-life
cost that can be attached.
The final number for lives lost from Hurricane Irene appears to be 24. Just one of the deaths was in New
York City. The deadliest Atlantic hurricane since 1900 was
in Galveston ,
in 1900, with a range of between 8,000 and 12,000 deaths.
Five Deadliest Atlantic Hurricanes Since 1900
Name or Location, Category
|
Year
|
Deaths
|
1.
|
1900
|
8,000-12,000
|
2.
|
1928
|
2,500-3,000
|
3.
Katrina, Category 3
|
2005
|
1,200
|
4.
|
1919
|
600 (287
land)
|
5.
|
1938
|
600 (256
land)
|
Source:
NOAA, National Weather Service, National
Hurricane Center . Blake and Gibney, 2011. The National Weather Service started giving names to hurricanes in 1953.
The
fifth-deadliest was the 1938 Long Island Express. On the criterion of deadliness, Hurricane Irene did not qualify as one of the five most severe.
2. Loss of Physical Property.
Property can be destroyed by wind or
flooding or a combination. This means a loss of wealth of the property owner.
If the loss is charged against revenue, it means a loss of revenue. (A building
may be a depreciated asset; loss of inventory is likely to be expensed.) The
first impact may be flying debris, the lifting off of roofs, the flattening of
flimsily constructed buildings. The delayed effects include (a) loss of
electricity from downed power lines, which means that many perishables have to
be thrown out, and (b) flooding, which destroys or rends temporarily useless
all kinds of property such as books and electronics, especially if the flooding
is from salt water, which MTA Chairman Joe Lhota and Con Ed Chairman Kevin Burke say is especially damaging to power connections, create huge problems for electricity supply and transportation infrastructure.
3. Business Interruption. The
delayed effects of a hurricane also include business interruption. Increasingly, businesses insure not
only against loss of property but the loss in profits that comes from an
interrupted business. When a restaurant or a theater remains closed because of
floods that prevent people from showing up, it is hard to make up the loss
because the business space has a limited capacity. That is something that is
not fully taken into account by those who look for a large rebound after a
disaster, as might be true of a retail store that offers a post-hurricane sale.
Some kinds of losses are much harder to make up Figures on the cost of
hurricanes increasingly include business-interruption losses, which bias upward
the later numbers – another reason it is so important to adjust for inflation
as discussed below.
4. Insured vs. Uninsured Private
Losses. Insurance companies are most interested in the total of
insured losses. But from an economic perspective, losses to individuals (e.g.,
workers paid by the hour) are real. The money that would have been spent in the
community by the individuals is missing. The National Hurricane
Center uses a simple
formula to estimate uninsured losses - it doubles the number for insured
losses.
5. Government Losses. At the national level, flood insurance is provided by the
National Flood Insurance Program. Individuals pay a premium for this insurance,
which would otherwise not be available. After a hurricane, there will be
payouts and a loss that may exceed cumulative premiums. The National Hurricane
Center in its estimate of
damage adds in the number for flood damage provided by the National Flood
Insurance Program. FEMA programs provide relief to local governments and individuals.
Other Federal bodies (the dewatering unit of the Army Corps of Engineers, for
example), states (emergency response teams) and localities (police, fire,
sanitation, ambulance) must also be factored in as costs of a disaster.
6. Adjustments for Inflation or
Growth in Business Activity. Two kinds of adjustments are typically made to comparisons
among hurricanes. One is to adjust cost figures for inflation. The Christian Science Monitor story cited above incorrectly
describes Hurricane Irene as the fifth mostly costly hurricane in U.S. history. As I explained last year, that
label only works if we are under the delusion that a dollar 100 years ago
should be valued the same as a dollar today. (Apart from the fact that
business-interruption costs are increasingly included in hurricane losses,
adding to the size of the numbers.) There are widely available
cost-of-living indicators to refer to, such as this one from the BLS. Business activity measures are
used to relate hurricane damage to the value of the real estate through which
the hurricane travels. This is a good predictor of cost and is also a factor to
consider in comparing the impact of a hurricane traveling the same path in
different years.
Total Economic Damage
The
deadliest hurricanes are not always the costliest in terms of property loss or
business interruption.
The
ten costliest Atlantic hurricanes are listed below with their estimated damage.
Total estimated damage includes insured and uninsured losses. A rule of thumb
is that uninsured losses equal insured losses. So if an insurance association or
forecaster estimates that insured losses are $10 billion, then total private
losses (insured plus uninsured) are commonly estimated at $20 billion. In
addition, losses are borne by Federal, state and local governments – the cost
of special national insurance programs like flood insurance, or the cost of
FEMA assistance, or the cost to states and localities of the overtime of
emergency assistance personnel or the damage to public infrastructure.
Note
that earlier estimates are generally based on physical damage only, whereas
later economic impact numbers, after WWII, include impacts such as business-interruption
costs because these became widely insured events.
In
addition, dollar-value rankings must be adjusted for inflation. There is no
sense in unadjusted dollar numbers that go back to 1900. The most costly U.S. hurricane ever was the 1926 Miami Hurricane,
which cost $165 billion in 2010 dollars according to the National Hurricane
Center .
Ten Costliest Hurricanes
(pre-Sandy)
Rank
|
Hurricane
|
Year
|
$bil.
(2010 $)
|
1
|
Great
|
1926
|
164.8
|
2
|
Katrina
|
2005
|
113.4
|
3
|
1900
|
104.3
|
|
4
|
1915
|
71.4
|
|
5
|
Andrew
|
1992
|
60.5
|
6
|
L.I.
Express
|
1938
|
41.1
|
7
|
1944
|
40.6
|
|
8
|
1928
|
35.3
|
|
9
|
Ike
|
2008
|
29.5
|
10
|
Donna
|
1960
|
28.2
|
Source:
NOAA, National Weather Service, National Hurricane Center, Pielke et al.
(R. A. Pielke, Jr., J. Gratz, C.W. Landsea, D. Collins, M. Saunders, and R.
Musulin, 2008: "Normalized Hurricane Damages in the U.S.:
1900-2005." Natural Hazards Review, 9, 29-42, cited in Blake and Gibney, 2011). Pielke et
al. adjust historical data for inflation to 2010, wealth per capita and
population. The adjustment for inflation is essential.
Hurricane
Irene's estimated cost was $15 billion. Clearly, it does not rank among the ten
most costly hurricanes. However, Hurricane Sandy will surely do so. The key is
insured losses and government losses. If Hurricane Sandy ends up with insured
losses above $15 billion, the economic impact could end up at about $38
billion, and it will rank #8, between the SW Florida Hurricane of 1944 and the Lake Okeechobee Hurricane of 1928. But if insured losses approach $20 billion, the cost of Hurricane Sandy will end
up above the 1938 Long Island Express, and would rank #6. If insured losses
exceed $25 billion, it could rank ahead of Hurricane Andrew, at #5.
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