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(Pdalo) Information System Indexing Disaster Losses Pacific Damage and Loss (PDaLo) Information System Pacific Damage and Loss (PDaLo) Information System Indexing Disaster Losses Anna Rios Wilks AUGUST 2013 SPC SOPAC PUBLISHED REPORT (PR189) Important Notice This report has been produced with the financial assistance of the European Union. The views expressed herein do not necessarily reflect the official opinion of the European Union. © with support from United Nations UNISDR Pacific Damage and Loss (PDaLo) Information System Indexing Disaster Losses Anna Rios Wilks AUGUST 2013 SPC SOPAC PUBLISHED REPORT (PR189) Pacific Damage and Loss (PDaLo) Information System TABLE OF CONTENTS PURPOSE................................................................................................................................. 2 REPORTING LOSSES OVER TIME.......................................................................................... 2 AN EXAMPLE OF INDEXING LOSSES IN PICs...................................................................... 3 Methodology and Data........................................................................................................................ 3 Recorded Events................................................................................................................................ 3 Nominal versus Indexed Losses.......................................................................................................... 4 Individual Country Losses................................................................................................................... 5 Marshall Islands.................................................................................................................................. 6 Samoa................................................................................................................................................ 6 Solomon Islands.................................................................................................................................. 7 Tonga.................................................................................................................................................. 7 Vanuatu............................................................................................................................................... 8 USING INDEXING FOR POLICY DECISIONS.......................................................................... 9 CONCLUDING RECOMENDATIONS........................................................................................ 9 SOURCES................................................................................................................................. 10 Indexing Disaster losses Pacific Damage and Loss (PDaLo) Information System LIST OF FIGURES Figure 1: Increase in recorded losses due to natural hazard events in Pacific Island Countries.... 2 Figure 2: Frequency of events.................................................................................................... 3 Figure 3: Population affected by hazard..................................................................................... 4 Figure 4: Fatalities...................................................................................................................... 4 Figure 5: Losses over time......................................................................................................... 5 Figure 6: Total losses - Marshall Islands......................................................................................6 Figure 7: Total losses - Samoa................................................................................................... 6 Figure 8: Total losses - Solomon Islands.................................................................................... 7 Figure 9: Total losses - Tonga..................................................................................................... 7 Figure 10: Total losses - Vanuatu.................................................................................................. 8 LIST OF TABLES Table 1: Summary of country events......................................................................................... 5 Table 2: Total country losses for cyclones and earthquakes (1979-2009).................................. 8 Table 3: Average annual country costs...................................................................................... 9 ACRONYMS PDaLo Pacific Disaster and Loss PIC Pacific Island Country DRM Disaster Risk Management Indexing Disaster losses 1 Pacific Damage and Loss (PDaLo) Information System PURPOSE The Pacific Disaster and Loss (PDalo) information system is an online database founded on the DesInventar methodology which holds data on natural hazard events occuring in the Pacific region over the last 500 years1. Cook (2013) shows the importance of natural hazard loss data for the Pacific Island Countries (PICs) and the versatility of the DesInventar system in the analysis of this data. The PDaLo system reports losses2 in nominal terms, (often called current monetary terms or currency) from the year in which the natural hazard event occurred. Although this is common practice, it is important that these nominal values are transformed into constant (comparable) monetary terms before they are compared or aggregated by an analyst. This document presents the use of indexing to understand the true pattern of natural hazard costs over time. It also aims to promote the use of indexing when quantifying the cost of natural hazard events in the PICs to better inform policy and decision making. As an example, the recorded costs of historic natural hazard events in five Pacific Island Countries will demonstrate the importance of indexing. REPORTING LOSSES OVER TIME When losses arise because of a natural hazard event, they are reported in monetary units. This can be the local currency of the country in which the natural hazard event occurred or, equally commonly, in terms of the United States dollar currency (US$) so that the costs produced by an event can be communicated to the international community in a standard currency and can better allocate funds to the country’s disaster management efforts, if required. Monetary units are nominal units; their real value changes over time. This is because the real value of any currency will change over time: the real value of a one dollar note today is different from the real value of a one dollar note 50 years ago, even though its nominal value of one dollar has not changed. For example, many of us might notice that the nominal value (the money price) that we paid for the same food we ate ten years ago, such as a bag of rice or a kilo of bananas, was different (often less) than the price we pay for the exact same items today. Prices in most countries seem to gradually increase each year, which makes the real (or ‘true’) value of their currency decrease because, for the same nominal value (a note or a coin), people cannot buy as much. Consequently, if we look at losses from natural hazard events that wereIndexing recorded PDaLo in nominal Information values (monetary System terms), they may appear to increase over time. Figure 1 shows recorded losses over the 20th century for the 25 PICs included in the PDaLo data system. Figure 1: Increase in recorded losses due to natural hazard events in Pacific Island CountriesFigure 1: Increase in recorded losses due to natural hazard events in Pacific Island Countries. Losses over 4me 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Losses (thousand USD) YEAR Year 1 The PDaLo information system is a living database which constantly evolves over time. This report is based on data accessed on 20th September 2013. This trend of increasing losses is partially due to there being more natural hazard events and 2 For the purpose of this document, the term “losses” refers to the value of all damages and costs that have been recorded due coststo anrecorded event. and the fact that nations may have more assets that are damaged by a natural hazard event. However, this trend is also seen because, in most countries, the price levels (nominal value of currency) increase over time. Nevertheless, this does not mean that 2 Indexing Disaster losses the real value of losses incurred due to natural hazard events in the past was any smaller than that of today. Consequently, when costs are measured in monetary units such as US dollars, care must be taken if the values of costs are to be compared or aggregated across time periods. The fact that price levels or the 'nominal values' of a currency change over time requires that the value of losses incurred in different time periods should be converted to a common point in time (e.g. all measured using the price level of a single year) if we are to compare them across time. Otherwise, we are at risk of misinterpreting the true magnitude of the costs recorded. This may be most simply approached by ‘indexing’3. For example; the US $100 thousand loss recorded for Vanuatu after Tropical Cyclone Eric in 1985 does not have the same real value as the 100 thousand dollar loss recorded for Vanuatu after Tropical Cyclone Ivy in 1989. If the US $100 thousand loss from 1985 is indexed to 1989 prices, its value becomes over US $115 thousand. We can then state that the real value of the losses recorded for Cyclone Eric is higher than that for Cyclone Ivy. 3 The method of indexing employs these changes in the price level (the inflation rate) in order to transform the
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