Beyond the stage-damage function: Estimating the economic damage on residential buildings from storm surges

Abstract. Given the predicted global increase in extreme weather events, such as storm surges, the design of effective response strategies requires a very detailed and accurate understanding of the major factors driving damage costs. The costs of climate hazards are usually estimated using engineering approaches, which, based on different levels of building-specific information, link water inundation levels to the costs incurred by building owners. More recently, a number of scientific papers have pointed to the 5 limitations of such approaches because they omit important information about key context-specific factors such as emergency response options and a range of social factors reflecting age and social networks in the affected communities. This study contributes to this growing literature by providing rigorous and detailed econometric estimates of damage costs for residential buildings resulting from a storm surge that impacted large parts of Denmark in December 2013. We collected a comprehensive data set consisting of insurance cost data, the characteristics of individual buildings (size, age, construction 10 materials, heating source and distance from bodies of water), emergency services, previous experience with storm surges in the municipality and socio-economic factors. Our results indicate that the isolated effect of inundation depth on damage costs is highly sensitive to the inclusion of other explanatory variables. In our models the isolated effect of inundation depth is more than halved when our full set of control variables is included. Furthermore, our findings highlight the importance of controlling for spatial effects, such as the level of emergency services and socio-economic conditions. Discussing the transferability of our 15 findings, we highlight key sensitivities when using our damage functions in other contexts.