Psicoacústica 

Insurance is a complex industry, which is a large component of the U.S. economy. In 2012, insurance premiums in the life and health and property and casualty insurance sectors totaled more than $1.1 trillion, or approximately 7% of gross domestic product.1 _{The insurance industry provides complex}

alternatives in the protection of insured facilities throughout the nation from a loss, including from vulnerabilities from natural disasters.

Of the ten costliest disasters in U.S. history, eight were damages caused by hurricanes, of which six made landfall since 2000 according to the National Association of Insurance Commissioners. Hurricane Katrina in 2005 caused $125 billion of overall losses with insured losses of $62 billion, which remains the worst disaster in U.S. history.2 _{Hurricane Sandy in 2012 and the 1994}

Northridge Earthquake are the second and third worst disasters in U.S. history with $20 billion and $15 billion in insured losses, respectively.

Disaster losses from natural disasters have a tremendous financial impact on the US economy, insurance companies, and the taxpayer. Despite relatively few significant events in the first half of 2013, insured losses worldwide reached $20 billion, as compared to the 10-year average of $25 billion for the six-month period.3 _{Roughly, half of the losses for the period were in the United States,}

which included severe weather in March 2013, severe weather and tornadoes in May 2013, and a winter storm in April 2013. In 2012, U.S. insured losses totaled

1 _{U.S. Department of the Treasury, Annual Report on the Insurance Industry (Washington,}

D.C.: Federal Insurance Office, 2013), 5.

2 _{NatCatService, “Significant Natural Catastrophes 1980–2012,” last modified March 2013,}

accessed October 2, 2013,

http://www.munichre.com/app_pages/www/@res/pdf/NatCatService/significant_natural_catastrop hes/2012/NatCatSERVICE_significant_eco_en.pdf.

3 _{Impact Forecasting/Aon Benfield, “1st Half 2013 Natural Disasters Cost $85 Billion,”} Insurance Journal, July 25, 2013.

$58 billion for weather related catastrophes, which far exceeded the 10-year average of $27 billion per year in the United States according to the National Association of Insurance Commissioners.

As these insured losses indicate, insurance plays a critical role in the economic recovery of communities following catastrophic events. For most entities, insurance is the only method of managing risk in event of a loss. In some cases, insurance protection from catastrophic damage could be the difference between recovery and the inability to do so. For public jurisdictions, an added layer of protection is afforded to state governments, tribal governments, local governments, certain private nonprofits, and other essential governmental services through the Robert T. Stafford Disaster Relief and Emergency Assistance Act.4 _{Assistance under this Act is authorized after the}

President determines that an event is of the severity and magnitude to warrant a major disaster or emergency declaration to support response, recovery, and mitigation of the state or tribe.5 _{The Act proclaims that disasters often disrupt the}

normal functioning of governments and communities and those special measures for reconstruction and rehabilitation of devastated areas are necessary to assist the efforts of the affected states and tribes in expediting the rendering of aid, assistance, and emergency services.6 _{While the Stafford Act authorizes}

assistance to both individuals and public jurisdictions, the area of research of this work is focused on the buildings and other insurable facilities that would receive assistance under FEMA’s Public Assistance program and shortcomings in the law, regulation, and policy associated with the current guidance on insurance considerations.

4 _{Federal Emergency Management Agency, Public Assistance Policy Digest (Washington,}

DC: FEMA P-321, 2008), 41.

5

Public Assistance is the largest component of disaster assistance programs provided by FEMA. Between 2000 and 2012, over $46 billion of assistance has been provided through FEMA’s Public Assistance program or an average of $3.5 billion per year according to the Federal Emergency Management Agency website. Hurricane Katrina represents a substantial portion of the total assistance provided, as the largest disaster in US history. Excluding Public Assistance damages from Hurricane Katrina, Public Assistance program provided an average of $2.7 billion per year between 2000 and 2012.

In providing such relief, FEMA’s Public Assistance program provides assistance for emergency work—debris removal and emergency protective measures—and permanent work. In addressing permanent work, one of the five categories of assistance is for buildings and equipment.7 _{Facilities eligible for}

assistance in the category E (Buildings and Equipment) component of permanent work are typically insurable and that is the primary focus of this research. Although, insurance is applicable to all categories of work, including debris removal, temporary facilities, and the other categories of permanent work.

The key components of insurance as related to FEMA’s Public Assistance program are the prohibition of a duplication of benefits, deductions from grant funding for uninsured facilities in a Special Flood Hazard Area (SFHA), and the requirement to obtain and maintain insurance after a facility sustained damage, which was the result of a declared event. After a presidentially declared disaster, the role of insurance through FEMA’s Public Assistance program can be a contentious issue. While insurance from the first disaster is not as controversial, the implications from the first disaster have significant impacts on a subsequent, similar event. In the first event, the insurance obtain and maintain requirements are established as condition of the grant. The obtain and maintain requirement dictates insurance coverage for a facility on subsequent events of the same type.

7 _{Federal Emergency Management Agency, Public Assistance Policy Digest, 17.}

The requirement to obtain and maintain insurance as a condition of the grant represents the protection of the federal investment in the damaged facility.

In FEMA’s Public Assistance program, the law and regulation are provided by the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended, and related authorities and Title 44 of the Code of Federal Regulations, respectively. The policy of insurance and guidance in the administration of insurance as related to FEMA’s Public Assistance program is provided by various FEMA documents including the Public Assistance Guide and Public Assistance Digest. The law is the overarching guidance supported by regulation and then policy.

There are six key provisions in the Stafford Act that relate to insurance and the Public Assistance program:

• The intent of Congress with respect to insurance as defined in the Stafford Act is to encourage individuals and governments to protect themselves by obtaining insurance to supplement or replace government assistance;8

• The intent of Congress is to encourage hazard mitigation to reduce losses from disasters;9

• A requirement to obtain and maintain insurance as a condition of receiving PA grant funding;10

• A prohibition on duplication of disaster assistance benefits (from any source, including insurance proceeds);11

• Deductions from grant funding for certain uninsured facilities located in an SFHA;12 and

• FEMA shall not require greater types and extent of insurance than are certified to him as reasonable by the appropriate State Insurance Commissioner responsible for such insurance.13

8 _{The Stafford Act, Section 101.} 9 _Ibid.

10 _{Ibid., Section 311(b).}

These provisions are the key to most insurance related issues and the administration and implementation of the Public Assistance program as related to insurance. Based on these provisions, FEMA’s Public Assistance program should be shaped to better promote sound risk management, improve community resiliency, and enhance efficient insurance coverage decision making for facility owners that is equitable, effective, and efficient insurance protections for the facility owner, the state, the taxpayer and FEMA.