Authors: Dakshina G De Silva Jamie B Kruse Yongsheng Wang
Publish Date: 2008/03/11
Volume: 47, Issue: 3, Pages: 317-330
Abstract
This article examines the spatial dependence among housing losses due to tornadoes using data from the May 1999 Oklahoma City tornado In order to examine the existence of spatial dependence and its impacts on the damage analysis we compare an estimation based on a traditional ordinary least square model with the general spatial model The results show that housing damage in this disaster area is highly correlated Monetary losses not only depend on the tornado that struck residences but are related to the damage magnitudes of neighboring houses Average losses as well as the loss ratio increase with the Fujita Scale damage rating We conclude that the general spatial model provides unbiased estimates compared to the ordinary least square model In order to construct appropriate home insurance policies for tornado disasters or to improve the damage resistance capabilities of houses it is necessary for insurance underwriters and builders to consider spatial correlation of tornado damageThis work was performed under the Department of Commerce NIST/TTU Cooperative Agreement Award 70NANB8H0059 We would like to thank Dr Douglas A Smith and the participants at both the 2005 Western Economic Association International meeting San Francisco CA and the 2004 Southern Economics Association meeting New Orleans LA for useful comments and suggestions
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