Catastrophe risk models for evaluating disaster risk reduction investments in developing countries.

Major natural disasters in recent years have had high human and economic costs, and triggered record high postdisaster relief from governments and international donors. Given the current economic situation worldwide, selecting the most effective disaster risk reduction (DRR) measures is critical. This is especially the case for low- and middle-income countries, which have suffered disproportionally more economic and human losses from disasters. This article discusses a methodology that makes use of advanced probabilistic catastrophe models to estimate benefits of DRR measures. We apply such newly developed models to generate estimates for hurricane risk on residential structures on the island of St. Lucia, and earthquake risk on residential structures in Istanbul, Turkey, as two illustrative case studies. The costs and economic benefits for selected risk reduction measures are estimated taking account of hazard, exposure, and vulnerability. We conclude by emphasizing the advantages and challenges of catastrophe model-based cost-benefit analyses for DRR in developing countries.

Protective measures, personal experience, and the affective psychology of time.

We examined the role of time and affect in intentions to purchase a risk-protective measure (Studies 1 and 2) and explored participant abilities to factor time into the likelihood judgments that presumably underlie such intentions (Study 3). Participants worried more about losing their possessions and were more likely to purchase a protective measure given a longer term lease than a short-term lease, but only if their belongings were described in affect-poor terms. If described instead as being particularly special and affect-rich, participants neglected time and were about equally likely to purchase a risk-protective measure for shorter and longer term leases. However, and consistent with prior literature, the cognitive mechanism underlying this time-neglect-with-affect-richness effect seemed to be the greater use of the affect heuristic in the shorter term than the longer term. Study 2 results demonstrated that prior experience with having been burglarized amplified the interactive effect of time and affect. Greater deliberation did not attenuate this effect as hypothesized whether deliberation was measured through numeracy or manipulated through instructions. The results of Study 3 indicated that few participants are able to calculate correctly the risk numbers necessary to take time into account. Two possible solutions to encourage more purchases of protective measures in the long term are discussed.

Incentives for mitigation investment and more effective risk management: the need for public-private partnerships.

A key question facing both well-developed industrial countries and emerging economies is how to reduce future disaster losses while still providing financial protection to victims from these events. This paper proposes a strategy for the use of cost-effective risk mitigation measures coupled with insurance and/or new capital market instruments to achieve these objectives. The mix of these measures will depend on the governance structure and the institutional arrangements in the particular country. There will always be a need for a combination of policy tools and the interaction among key interested parties from both the private and public sectors in developing a disaster management strategy. Two examples, one from US and the other from Honduras, illustrate differences between strategies that countries can adopt.

Mitigation and benefits measures as policy tools for siting potentially hazardous facilities: determinants of effectiveness and appropriateness.

How do mitigation and benefits measures affect public acceptance for siting different kinds of potentially hazardous facilities? What kinds of benefits measures are seen as most (or least) appropriate for different kinds of facilities? This study used a nationwide telephone survey consisting of 1,234 interviews with randomly selected respondents to test for the effects of packages of safety and benefits measures for siting a landfill, prison, incinerator and nuclear waste repository. The experimental design used in the survey permits analysis of the fractions of respondents who are willing to change their initial levels of acceptance (or opposition) when presented with a sequence of the safety and benefit measures. The measures vary significantly in their impact on levels of acceptance for the facilities, and some measures that would at face value appear to reassure residents of facility safety turn out to lack credibility and therefore diminish facility acceptance. Ordering of the benefits versus safety measures significantly affects changes in acceptance in surprising ways. The perceived appropriateness of different kinds of benefits measures varies systematically by the type of facility under consideration. It appears that successful benefits packages will directly address the underlying dimensions of concern caused by the facility. These findings point to the importance of further research on "commensurable" benefits measures.

Determinants of priority for risk reduction: the role of worry.

One hundred twenty-two members (experts) of the Society for Risk Analysis completed a mailed questionnaire and 150 nonexperts completed a similar questionnaire on the World Wide Web. Questions asked included those about priorities on personal and government action for risk reduction, badness of the risk, number of people affected, worry, and probabilities for self and others. Individual differences in mean desire for action were largely explained in terms of worry. Worry, in turn, was largely affected by probability judgments, which were lower for experts than for nonexperts. Differences across risks in the desire for action, within each subject, were also determined largely by worry and probability. Belief in expert knowledge about the risk increased worry and the priority for risk reduction. A second study involving 91 nonexperts (42 interviewed and 49 on the Web) replicated the main findings for nonexperts from the first study. Interviews also probed the determinants of worry, attitudes toward government versus personal control, and protective behaviors.

Compliance strategies and regulatory effectiveness of performance-based regulation of chemical accident risks.

This paper investigates the role that performance-based regulations can play in linking a firm's environmental, health, and safety concerns with their corporate strategy. The specific focus is on the performance standards required by the Clean Air Act Amendments (CAAA) which require firms that store or use certain chemicals to develop a Risk Management Plan (RMP) for reducing the likelihood and impact of accidents at their plants. Data from a series of case studies and interviews of executives in chemical firms reveal that proactive companies integrated many of the requirements of the CAAA into their management systems prior to the regulatory requirements. Most of these firms tend to be large ones. Small firms often lack the resources to implement these regulations and hence have tended to have a more difficult time with compliance.

Utilizing third-party inspections for preventing major chemical accidents.

This paper proposes using certified third parties, coupled with Model Risk Management Programs (Model RMPs), to implement EPA's Proposed Rule on the prevention of chemical accidental releases. We concentrate on the insurance aspects of this third-party approach and show that it could enable insurers to more cost-effectively provide coverage against the risks of chemical accidental releases. The third-party approach may also signal the facility's safety and reduce the enforcement costs of regulations.

Cognitive processes and the decisions of some parents to forego pertussis vaccination for their children.

Public health analyses suggest that, in spite of the possibility that pertussis vaccine may cause rare cases of neurological injury, catastrophic risks to individual children are lower if they are vaccinated. A number of parents, however, choose not to vaccinate their children. The purpose of this study was to investigate the decision processes of some parents who choose to vaccinate and some parents who choose not to do so. Surveys were mailed to 500 randomly selected subscribers of Mothering magazine. Two hundred and ninety-four completed questionnaires were returned (59%). In addition to well-recognized factors in vaccination decisions, perceived dangers of the vaccine, and of the disease and susceptibility to the disease, several cognitive processes not previously considered in vaccination decision studies were found to be important predictors in this population of parents: perceived ability to control children's susceptibility to the disease and the outcome of the disease; ambiguity or doubts about the reliability of vaccine information; a preference for errors of omission over errors of commission; and recognition that if many other children are vaccinated, the risk to unvaccinated children may be lowered. Although perhaps most cases of undervaccination for pertussis reflect more general problems of health care access, some parents choose to forego vaccination for their children for other reasons. Traditional risk-benefit arguments alone will be unlikely to persuade these parents to reassess their decisions. Efforts to increase childhood vaccination must incorporate an understanding of the cognitive processes that help drive these decisions.

Omission bias and pertussis vaccination.

BACKGROUND: Several laboratory studies have suggested that many people favor potentially harmful omissions over less harmful acts. The authors studied the role of this omission bias in parents' decisions whether to vaccinate their children against pertussis. METHODS: Two hundred mail surveys were sent to subscribers to a magazine that had published articles favoring and opposing pertussis vaccination. Subjects were asked about their beliefs about the vaccine and the disease, and whether they had vaccinated their own children or planned to, and they were given test items to identify omission bias in their reasoning. RESULTS: One hundred and three subjects (52%) responded to the survey. Respondents who reported they did not or would not allow their children to be vaccinated (n = 43; 41%) were more likely to believe that vaccinating was more dangerous than not vaccinating (p < 0.001). They were also more likely to exhibit omission bias (p = 0.004), holding constant their stated beliefs about the danger of the vaccine. CONCLUSIONS: Omission bias plays a role in decisions not to vaccinate with pertussis vaccine, beyond the role played by belief about the risk of vaccination.

Health insurance under competition: would people choose what is expected?

To determine relative preferences for different cost-sharing options, we asked a 17% random sample of 2,754 nonunion employees to compare health insurance policies that differed in the level of 1) deductible amount, 2) coinsurance rate, 3) coinsurance limit, 4) maximum liability, and 5) price. Using conjoint analysis, we derived preference curves for each of the five components and measured preferences for the compromise between more coverage and the corresponding price increase. In contrast to other studies, our findings suggest that under fair market prices, respondents would choose policies with greater coverage for catastrophic illness, and they would as likely choose cost-sharing policies that contain incentives to reduce utilization as they would choose policies without these incentives.