Disaster Insurance: A Tool for Hazard Mitigation.

This paper evaluates alternative measures for mitigating losses to residential structures from natural disasters. The first part focuses on the effect of liberalized federal disaster relief policies on the types of structures which will be built in hazard-prone areas. Both physical losses from disasters as well as intangible costs, such as the value of a human life, are considered in the evaluation of two alternative type structures. The second part of the paper discusses four extreme cost-bearing approaches to cover losses from natural disasters: (i) Total federal responsibility, (ii) Self insurance by the homeowner, (iii) Required insurance protection, (iv) Land use restrictions and building codes. The concluding section suggests a plan for mitigating future losses based on comprehensive disaster insurance coupled with land use measures and building codes regulations. A critical question which remains to be answered is whether disaster insurance should be voluntary or required. [ABSTRACT FROM AUTHOR]