Statistical analysis of damage shows that nationally aggregated US hurricane losses normalized for inflation, population and individual wealth has been constant since 1900. Detrended nominal damage increases at approximately the same rate as the US Gross Domestic Product; ~ 6% increase. Yet, normalized and detrended US damage are approximately log-normal, but somewhat leptokurtic and negatively skewed with standard deviations of 10 to 12 about their geometric means. Z-CAT cannot reproduce this large variability. Current population size distributions show log-normality much like the distribution of losses but with a smaller variance. Here we reassess US aggregated loss under the hypothesis that the log normal distribution of losses is inherited from a log-normal distribution of assets rather than from a Zipf distribution.
A modified version of Z-CAT, based upon a log normal distribution of populated places will be more realistic and provide insight to what controls the shape of the nationally aggregated damage exceedance probability curve; a negatively skewed, leptokurtic distribution. The application of a hurricane catastrophe model that uses the actual distribution of coastal cities as well as geographic, inter-seasonal, multi-decadal or secular variations of landfall intensity and frequency will also aid in understanding the peril. A salient result from the previous study was that damage would need to double on a century timescale to attain significance using standard nonparametric tests. Yet, increasing hazards may become financially significant before they become statistically significant. An example is the impact of Hurricane Maria on Puerto Rico. How would using the log normally distributed assets change this? How rapidly would hurricanes characteristics need to change to produce significant trends in losses? How does the intensity and frequency of the peril affect the damage trend? If more threatening peril becomes more frequent, how would building standards have to improve to compensate? How would insurers, regulators, and policy holders address the conflict between the actual changes in peril that may or may not be masked by long term natural variability such as ENSO and AMO?
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Hernandez, Javiera I., 2014: Does the Pareto distribution of hurricane damage inherit its fat tail from a Zipf distribution of assets at hazard?; FIU Electronic Theses and Dissertations. Paper 1488. http://digitalcommons.fiu.edu/etd/1488
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