market losses are not necessarily intangible). Market losses are losses to goods and services that are traded on markets, and for which a price can easily be observed. Even though droughts or heat waves affect directly the economic output (especially in the agriculture sector), direct market losses from most disasters (earthquakes, floods, etc.) are losses of assets, i.e. damages to the built environment and manu‐ factured goods. These losses can be estimated as the repairing or replacement cost of the destroyed or damaged assets. Since building and manufactured goods can be bought on existing markets, their price is known. Direct market losses can thus be estimated using observed prices and inventories of physical losses that can be observed (as recorded, e.g., in the EM‐DAT database or insurance‐industry databases) or modeled (using, e.g., catastrophe models of the insurance industry or simplified methodologies; see Ranger et al., 2011).

Non‐market direct losses include all damages that cannot be repaired or replaced through purchases on a market. For them, there is no easily observed price that can be used to estimate losses. This is the case, among others, for health impacts, loss of lives, natural asset damages and ecosystem losses, and damag‐ es to historical and cultural assets. Sometimes, a price for non‐market impacts can be built using indirect methods, but these estimates are rarely consensual (e.g., the statistical value of human life).

Indirect losses (also labeled “higher‐order losses” in Rose, 2004) include all losses that are not provoked by the disaster itself, but by its consequences. Different hazards communities have different approaches for defining indirect costs (e.g. Meyer and Messner (2005) and FLOODSite (2009) for floods; Wilhite (2000) and Wilhite et al. (2007) for droughts). Contentious issues may emerge around the edge of these definitions across hazard communities: what are the limits between direct and indirect costs categories? In particular discussions often occur around the notion of business interruption, which can be included in direct losses or in indirect losses, or as a stand‐alone category. For capital‐destroying hazards (flood, earthquakes, storms), the term “indirect losses” is often used as a proxy for “output losses,” i.e. the re‐ duction in economic production provoked by the disaster. Output losses include the cost of business in‐ terruption caused by disruptions of water or electricity supplies, and longer term consequences of infra‐ structure and capital damages.

An obvious illustration of why indirect losses are important is the difference between disaster scenarios with various reconstruction paces. In terms of welfare, there is a large difference between, on the one hand, a scenario in which all direct losses can be repaired in a few months thanks to an efficient recon‐ struction process and, on the other hand, a scenario in which reconstruction is inefficient and takes years. For the same amount of direct losses, welfare impacts are much larger in the latter case, and this should be taken into account.

To help identify indirect losses, we propose the following criteria. First, indirect losses are caused by sec‐ ondary effects, not by the hazard itself. Indirect costs can be caused by hazard destructions or by business interruptions. In addition to this obvious criterion, costs are indirect if they are spanning on a longer pe‐ riod of time, a larger spatial scale or in a different economic sector than the disaster itself. Classification of hazards by scale and time effect is done by, e.g., Brown Gaddis et al. (2006), and Jonkman et al. (2008).

This definition is consistent with definitions from different hazard communities. It includes business inter‐ ruption in direct losses (since their most classical definition makes them mainly short‐term, during the hazard duration). Also, this definition avoids consistency problems for slow‐onset hazards such as 3