Fall 2008 Version Professor Dan C. Jones FINA 4355.

Fall 2008 VersionFall 2008 Version

Professor Dan C. Jones

FINA 4355

Risk Management and Insurance: Perspectives in a Global EconomyRisk Management and Insurance: Perspectives in a Global Economy

5. Catastrophe Risk Assessment: 5. Catastrophe Risk Assessment: Natural Hazards Natural Hazards

Professor Dan C. Jones

FINA 4355

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Study PointsStudy Points

Catastrophic eventsDefinitions

Trends

Types of natural disasters

Gee Gees (Insight 5.3)

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Swiss Re Definition for 2007 Reporting PeriodSwiss Re Definition for 2007 Reporting Period

For 2006 Reporting Period:Shipping – 16.1MAviation – 32.2 M

Other Losses – 40 MOr Total Losses – 80M

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(United Nations) – Munich Re Definition(United Nations) – Munich Re Definition

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Frequency of Catastrophes Frequency of Catastrophes (Figure 5.1) (Figure 5.1) →→ 2007 2007

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Overall and Insured LossesOverall and Insured Losses

Yearly economic and insured losses from great natural catastrophes, along with trend lines for each.

Economic reasons explain much of the concentration trend.Additionally, people are drawn to areas that hold potential for greater economic prosperity, such as cities.

Personal reasons explain this concentration trend.

Figure 5.2

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Overall and Insured Losses Overall and Insured Losses (Figure 5.2)(Figure 5.2)

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Insured Losses Insured Losses (Figure 5.2) (Figure 5.2) →→ 2007 2007

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Types of Natural DisastersTypes of Natural Disasters

Earthquakes

Storms

Floods

Volcanism

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World Map of Natural HazardsWorld Map of Natural Hazards

Earthquake StormVolcanic Eruption

OtherFlood

Source: World of Natural Hazards (2000)

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EarthquakesEarthquakes

Earthquakes are caused by friction between moving tectonic plates.

Earthquakes originate at fairly well-defined faults.

The Pacific Rim is especially prone to earthquake activityRing of Fire (Figure 5.3)

Recent events1976 Tangshan, China

2003 Iranian earthquake

2005 in Kashmir, Pakistan

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Ring of FireRing of Fire

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Tsunamis and EarthquakesTsunamis and Earthquakes

TsunamiLarge, rapidly moving ocean waves produced by the displacement of water caused by earthquakes, landslides, volcanic eruptions or even a sufficiently large meteorite impact.

December 26, 2004, Tsunami near Indonesia

Canary Islands (Insight 5.1)

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StormsStorms

Generically known as “tropical storms”

Various names by regionTyphoon

Severe tropical cyclone

Severe cyclonic storm

Tropical cyclone

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Beaufort Scale of Wind VelocityBeaufort Scale of Wind Velocity

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Saffir–Simpson ScaleSaffir–Simpson Scale

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Average Number of Tropical Storms and HurricanesAverage Number of Tropical Storms and Hurricanes

10.6

13.8

28.1

2.1

8.2

9.7

12.3

6.4Atlantic Basin

Eastern Pacific Basin

Western Pacific Basin

Other Regions

Bay of Bengal Region

Indian Ocean Basin

Australian Region

Fiji Region

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2005 Hurricane Season2005 Hurricane Season

A highly active start to the season

Peak intensity values

Lowest central pressure ever recorded

Record number of named tropical cyclones

New areas affected – Europe and Africa

Hurricane Katrina (U.S.) and a failure of governmentInsight 5.2

Also check “A Failure of Initiative”

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FloodsFloods

Partial or complete inundation of a normally dry land area caused by an overflow of tidal, river, or lake water or after a heavy rain

100-year flood

Flood damage can result from a single event, such as a hurricane or thunderstorm. Floods also occur due to repeated exposure to rainfall.

Is Your Home Safe?Is Your Home Safe?

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VolcanismVolcanism

VolcanoThe vents in the earth’s crust through which gases, molten rock or lava, and solid fragments are discharged and to the conical shaped mountains or hills produced by the lava and other erupted material around the vent

Lava

Magma

Volcanic hazard assessment

Climate change and volcanism

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Worst Catastrophes – Casualty (History)Worst Catastrophes – Casualty (History)

Storm and flood in Bangladesh (11/14/1970) → 300,000

Earthquake [M7.5] in China (7/28/1976) → 255,000

Earthquake [M9] and tsunami in Indonesia (12/26/2004) → 220,000

Cyclone Gorky in Bangladesh (4/29/1991) → 138,000

Earthquake [M7.7] and landslide (Pakistan, India, Afghanistan) → 73,300…

Heat wave in Europe (6/1/2003) → 35,000

Kobe, Japan, earthquake [M7.2] (1/17/1995) → 6,425

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Worst Catastrophes – Cost (History)Worst Catastrophes – Cost (History)

Hurricane Katrina in the US (8/25/2005) → $68B

Hurricane Andrew in the US (8/23/1992) → $23B

Terror attacks in the US (09/11/2001) → $22B

Northridge earthquake [M6.6] in the US (1/17/1994) → $19B

Hurricane Ivan in the US (9/2/2004) → $14B…

Earthquake [M9] and tsunami in Indonesia (12/26/2004) → $2B

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Summary of Discussion – Gee Gees Summary of Discussion – Gee Gees (Insight 5.3)(Insight 5.3)

Add your/students’ points!

Discussion Questions

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Discussion Question 1Discussion Question 1

Is your country of birth or residence immune from natural catastrophe? If not, find the records of recent natural events that caused human casualty, property damage or both. Do they meet the definition of catastrophe by an international organization or insurer?

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Discussion Question 2Discussion Question 2

Discuss why tsunamis are closely related to earthquakes.

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Discussion Question 3Discussion Question 3

What are the possible factors affecting the rise of natural catastrophes in modern society? Describe the factors also reflecting the environments in the region with which you are familiar (e.g., the Caribbean, northern European or South Pacific).

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Discussion Question 4Discussion Question 4

Investigate the process of recovery from Hurricane Katrina (U.S.), the 2004 tsunami (Indian Ocean), or any major natural catastrophe in recent years. Examine the scale, scope and speed of the process to estimate how long it will take to complete it.