Promoting mitigation in existing building populations using risk assessment models

Windstorm mitigation credits are a method of promoting disaster-resistant construction and retrofitting by providing economic incentives through windstorm insurance for residential property owners. In the state of Florida, where the risk of hurricane damage is the greatest, a windstorm mitigation credit system, with mandatory insurer participation, has been in operation for the last 10 years with a series of credits based on property-specific voluntary inspections. This study uses a ‘per-building’ cost-benefit analysis of the entire voluntary residential property market to evaluate the effectiveness of the credit system at promoting active retrofitting, or hardening, of buildings within the population that result in loss reduction. In addition, this study examines the degree to which credits are being made for pre-existing building characteristics which do not result in any loss reduction. A series of five other alternative credit schemes are compared to the status quo. Evaluated on a state wide basis, this study concludes that the magnitude of the credits in the current system undermines the incentives associated with hardening by reducing the absolute insurance premium to the point that it is not cost effective to harden an individual structure. The study reveals that alternative credit scheme systems can dramatically increase the overall hardening levels such that 50% of the building population will voluntarily be retrofitted. These schemes are most effective when efforts to maximize the loss differential in the insurance pricing mechanism are combined with efforts to reduce the annual cost of retrofitting.