mitigation in most countries to date, this suggests that the great majority of disaster-prone areas have seen very few deaths from disasters regardless of the extent of mitigation measures – it is not that mitigation worked, it is that disasters did not occur. In turn, this suggests something about the likely costs and benefits of mitigation measures. In many cases, such measures will go ‘unrewarded’ by saving lives in a disaster.

# _<u>Box 6: The risk of a natural disaster</u>_

<mark>One analysis suggests that 3.4 billion people live in areas highly exposed to at least one natural hazard, including 2.3 billion at high risk of flooding and 328 million at high risk of earthquakes (Dilley et. al. 2005). Despite this widespread risk, a very few, very costly events account for most of the global human and economic toll from natural disasters. The top ten natural catastrophes worldwide 1970-2005 in terms of deaths (seven of which were earthquakes, with two storms and one tsunami) account for 1.2 million deaths. Figure 1 displays the cumulative death totals from the world’s biggest natural catastrophes over that period expressed as a percentage of the total natural disaster-related deaths 1970-2005.</mark><sup>12</sup> <mark>The figure suggests that the top six events alone account for more than half of all catastrophe-related deaths over the period, and the top twenty disasters account for nearly two thirds of all deaths (estimated from OECD, 2008).</mark><sup>13</sup> <mark>Regarding economic damage, in 1995, over half of total global economic damage from natural disasters that year was caused by the Kobe Earthquake.</mark><sup>14</sup> <mark>In 2005, more than three quarters of the global total was accounted for by the effect of Hurricanes Katrina, Rita and Wilma on the US. As with deaths, very big, very rare events are the cause of the most significant damage. In the US, 66 percent of the annual financial costs of flood events involve events predicted to occur less than once every hundred years. For hurricanes, the same figure is estimated at 83 percent (Burby, 2006).</mark><sup>15</sup> Furthermore, the science of earthquake hazard estimation is far from exact. The analysis in the Istanbul base case assumes a 2 percent probability of a damaging earthquake each year in the city, but this number is based on a (best available) estimate. While some areas are undoubtedly more prone to particular natural disasters than others, there is considerable uncertainty as to exactly how prone. Ellwood and Ellwood (1998) note that the Northridge earthquake in California was caused by a fault unknown (and so unplanned for) at the time of the quake. Again, St Louis, Missouri has seen a protracted battle between the Federal Office of Housing and Urban Development and local officials

> 12 This is based on the estimate that there are on average about 60,000 deaths from natural disasters a year, from OECD, 2008.

> 13 Similarly, over the past fifty years, about 80 percent of the one million deaths from earthquakes worldwide have been caused by ten great earthquakes (Spence, 2007).

> 14 Despite accounting for such a considerable percentage of total global damage from natural disasters that year, Horwich (2000) estimates that the Kobe earthquake reduced Japan’s (physical and human) capital stock by 0.08 percent, which might account for its marginal impact on the country’s GDP growth in 1995. 15 Burby also reports that repeatedly flooded properties account for 25 percent of claims payments while only two percent of NFIP policies –suggesting that payments are almost all made either to a small number of repeat-flooders or a large number of extremely (100-year)-rarely flooded.

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