Every political jurisdiction should have funds set aside (or assets that can be quickly and easily liquidated) to use in the event of a disaster or emergency. Mayors, Governors, Presidents, or any other government official should never be required to declare disasters in order to open the way for any federal or other source of funding.

The amount of money set aside in such disaster funds would be based on a percentage of the average yearly cost of disasters over an extended period of time, for example, the last 25 years. It would be required that all these emergency accounts be recalculated and fully funded/maintained each year. The percentages can very, but the general idea is as follows: cities would set aside and maintain funds equivalent to 50% of the 25-year average yearly costs of disasters and emergencies that have occurred in that city. Counties would set aside a fund equivalent to 100% of their average yearly costs, states would set aside 500%, and countries would set aside a prudent amount, or if they are members of larger, international organizations, each country could set aside 1000% of the average. This way, all jurisdictions, except for those paying less than 100% (namely, cities), pay, on average, the true costs of living or otherwise operating in that area. Such policies as these would encourage better planning of activities and construction of infrastructures to minimize risks and better survive disasters and other emergencies.

Let’s assume that over the past 25 years, the average cost of disasters in the city of Los Angeles was $50 million. This means that the city of Los Angeles would have been required to have $25 million in the bank (50% of $50 million) or somewhere where such an amount could be immediately (within one month) liquidated. Let’s say that the 25-year average costs for county disasters were $200 million, requiring it to have $200 million maintained in the bank because of the 100% requirement. Let’s also say that the 25-year average cost of disasters in the state of California is $1 billion. California would then have been required to have 500% of this amount ($5 billion) continually ready for use (able to be liquidated within 12 months) for an emergency. If the 25-year average cost of disasters in the US is $20 billion, then $200 billion would need to have been set aside (and able to be liquidated within 5 years).

The governments of these various political entities would be the primary insurers of all public and private infrastructures (commercial and residential structures, public buildings, natural gas, water, electrical, telephone infrastructure, roads and bridges, etc.). The contents of infrastructures, like furniture and computers would not be covered. This money would be used to repair or replace infrastructures that were damaged or destroyed as a direct result of the major disaster. Losses due to localized disasters like individual house fires or car or airplane crashes into buildings would not be covered. Widespread fires, flooding, or any major destruction that occurred as a direct result of an earthquake, for example, would be covered.

All claimants would be required to pay a 10% deductible for each valid claim. Lost business revenues, lost wages, and other such indirect losses resulting from the disaster would not be covered. Medical costs directly attributed to the disaster or emergency would also be covered. Private insurance would need to have been obtained to provide coverage for building contents, and, if desired, to cover the cost of the 10% deductible required for acceptance of the public insurance payout.

Let’s say, for example, that a $100 billion disaster hits the city of Los Angeles. Using this system of insurance, Los Angeles would be required to pay the first $25 million of emergency expenses that occur in one year. Los Angeles County would then begin to pay any costs over $25 million, and up to $200 million. California would then begin to pay all costs, over the first $200 million, up to $5 billion. The US Federal government would pay anything over $5 billion.

As a result of the $100 billion disaster in our Los Angeles example, the amount of money required in the mandatory emergency/disaster reserves would need to be recalculated. Assuming that everything stays the same and that the rate and costs of disasters stays remains steady for the next 25 years, as I assumed they did in the previous 25 years, then as a result of this $100 billion disaster in the city of Los Angeles, the new required disaster reserve amounts wound be as follows. The city of LA would need to maintain a $2.025 billion account. $100 billion divided by 25 years equals a 25-year yearly average cost of $4 billion per year. But the city only needs to maintain 50% of this amount, $2 billion. To this amount we add $25 million which is equal to 50% of the normal yearly disaster costs resulting from the normal, ‘background’ disaster costs of the previous 25 years. Los Angeles county’s new rate would be $4.2 billion ($100 billion/25 years = $4 billion per year + $200 million from normal ‘background’ disaster levels = $4.2 billion total county fund to maintain for the next 25 years assuming no change in the ‘background’ disaster levels of $200 million per year.) California would need to maintain an emergency account containing $25 billion for each of the next 25 years ($4 billion x 500% = $20 billion + $5 billion = $25 billion total). The US Federal government would need to maintain an account with around $240 billion ($200 billion for ‘background’ disaster costs + $40 billion ($4 billion x 1000%) for this new event) or whatever it thinks would be prudent. The US federal government would be the ultimate insurer unless the United States is nested within a larger, international network of insured countries.

This system can also be used to pay for environmental cleanup costs due to groundwater or subterranean pollution, oil spills, etc. Unless the costs of disasters, emergencies and/or environmental cleanup operations exceed the amount of money that that jurisdiction is supposed to have set aside for that year, no money should be given to that jurisdiction for these purposes. If the cost of disasters for one year in the city of Los Angeles was $51 million, the city would pay $25 million and the county would pay $26 million.