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<br />( <br /> <br />~ <br /> <br />~ <br />, <br />, <br />, <br />, <br />, <br />L <br />l <br />, <br />l <br />t <br />( <br />( <br />( <br />( <br />i <br />( <br />i <br />i <br />, <br />\ <br />, <br />, <br />I <br />I <br />\ <br />( <br />( <br />t <br />( <br />t <br />t <br />f <br />t <br />, <br />( <br />i <br />i <br />i <br />': <br />( <br />f <br />! <br />f <br />( <br />" <br />( <br />I <br />, <br />I <br />i <br />i' <br />, <br />I <br />, <br />i <br />r <br />, <br />I <br />I <br />I <br />( <br />f <br />i <br />i <br />( <br />I' <br />I <br />" <br />f <br />( <br />( <br />i <br />r <br />( <br />( <br />( <br />,. <br />, <br />, <br />I <br />, <br />( <br />i <br />i <br />i <br />: <br /> <br />The other side of this cost/number of structures coin is economy of scale. Structural measures <br />often take this factor into account in sizing. Nonstructural measures offer a similar opportunity <br />for economic savings, however, there is little contractor's bid data in a form by which this <br />savings can be measured. Fabricating two hundred flood shields is surely less costly per unit than <br />one; raising fifty homes would undoubtably cost less per unit than one; and hopefully <br />regulating 100 acres would not be ten times the cost to regulate 10 acres. In addition, to take <br />advantage of this savings it is necessary that individuals agree to simultaneous implementation <br />which may require a coordinated effort. <br /> <br />Damage Reduced <br />Damage reduction has traditionally been computed by estimating the difference in expecte.d <br />annual damage with and without a particular measure. The expected value is computed by <br />weighting damage caused by different levels of flooding by the probability of each level <br />occurring. By reducing either the frequency of flooding, or the amount of damageable property <br />susceptible to flooding, damage is reduced. This method can be used for individual structures or <br />groups of structures and for nonstructural, as well as structural measures. <br /> <br />Another method which has been used, and considered for use as a surrogate for estimating <br />damage reduced, is flood insurance premiums. Theoretically, the actuarial rate is computed as <br />the expected annual damage plus an administrative or load charge. In order for the premium to <br />be a valid surrogate for expected annual damage it must be based upon the actuarial rate and be <br />"closely linked to expected value of damages to the flood plain occupant" (1). At the present <br />time this mayor may not be the case since several insurance rates are available and the actuarial <br />rate is computed using generalized depth-damage and elevation-frequency data developed <br />nation-wide. Both the subsidized rate and zone rate are established to encourage purchase of <br />flood insurance so they do not necessarily reflect actual expected damage. The elevation rate is <br />intended to represent the actuarial rate, however, it is based upon generalized data. In any <br />particular community the actual expected annual damage may be considerably different. <br />Premium savings computed using these rates may be much higher (or lower) than damage <br />reduced by a particular action. One example is discussed in Reference 2. In addition, it should <br />be recognized that use of insurance premiums does .not include "non insurable" damages to <br />yards, outside improvements, etc. <br /> <br />Since the idea of premium savings is analogous to damage reduction it should be computed <br />as the difference in premium with and without some particular action. Existing structures which <br />are in communities under the Flood Insurance Program are eligible for coverage at subsidized <br />rates, thus if a structure were modified in some way the savings would be the difference <br />between the subsidized and some lower actuarial rate, and in general would be small. Existing <br />structures not in the Program would not realize a premium savings although damage could be <br />reduced. New structures locating in the flood plain under the Program (after it Flood Insurance <br />Rate Map has been established) must be protected to the 100 year flood lever, thus any premium <br />savings would be the difference in premium at the 100 year level and some higher level to which <br />the structure would be built, or between the 100 year level and some alternative site off the <br />flood plain where the premium would probably be zero. <br /> <br />Insurance premiums are of particular interest when considering nonstructural measures <br />because they provide the individual property owner with a measure of the cost of flooding to <br /> <br />7 <br />