Assessment of Hail Risk on Real Estate: First Estimations with Climate Data

Jens Hirsch, Thomas Braun and Sven Bienert

ERES from European Real Estate Society (ERES)

Abstract: Every year natural hazards and especially hailstorms cause damages to the building stock amounting to millions or even billions of Euros in Germany. The accelerating climate change involves an increasing amount of (convective) energy within the atmosphere with adherent additional damage issues. These events lead to ascending running costs as a result of adjusted insurance costs and insurance companies are already reacting by forcing measures of adaption. Generally the actors of the housing and real estate property industry suffer by a lack of solid information on identification, analysis and assessment of climatic risks. Taking into account this additional information is of immense importance not only for their investment decisions but also for the insurance companies and regional planning authorities. Official building standards do not regard local hail hazard in their guidelines yet and real estate valuation does not take potential damages into consideration.This paper presents the first approach of a regional hail risk assessment for real estate the property market. The model uses empiric radar measurements of the German Weather Survey, which were filtered with lightning data in order to preclude false echoes. These data were analyzed with extreme value statistics to derive local hazard functions. The hazard function's output parameter (radar reflectivity) was transformed to the input parameter of available damage function, which establishes the functional relation between hazard and damage. The assessment of potential risks includes the estimation of a building's vulnerability (building-specific damage functions) in order to identify the monetary damage in terms of an annual expected loss.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2013-01-01
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