FiCat-EQ: An Integrated System-Based Tool for Assessing Financial Vulnerability and Economic Impact of Seismic Risk, Case Study: Housing Sector of Iran

Governments play a crucial role in disaster risk management, where integrating financial risk management with a comprehensive understanding of disaster economics is essential. However, the ability of governments to develop effective disaster risk management strategies varies widely due to differences in capacities and resource constraints across countries. Integrating disaster risk modeling with financial instruments helps bridge the gap in the government's capacity and available resources to manage disaster risks. Accordingly, an innovative framework has been developed to assess the financial vulnerability of communities to seismic hazards and analyze disaster financing strategies across various regions. Based on this framework, the FiCat-EQ (Financial Impact of Catastrophe-Earthquake) toolbox has been designed to provide an interactive evaluation of financial vulnerability, macroeconomic conditions, and recovery processes considering the fiscal gap. The results obtained from FiCat-EQ facilitate consensus among policymakers across various sectors on earthquake risk management strategies. As a demonstration of its application, the housing sector in Iran was selected as a case study. The results indicate that Iran faces a high level of financial vulnerability to seismic risks, significantly affecting the housing sector's contribution to Gross Domestic Product (GDP) and prolonging the reconstruction phase. The average annual reduction in the housing sector's GDP contribution is estimated at approximately USD 315 million. Reductions in the housing sector's GDP contribution with return periods of 475 and 1000 years are estimated at approximately USD 5.60 billion and USD 6.62 billion, respectively. These findings underscore the critical need for proactive resource allocation planning (e.g., prevention, risk mitigation, reserve funds, insurance), as well as relief and reconstruction efforts post-disasters. Moreover, the modular design of FiCat-EQ allows for seamless adaptation across diverse regions, extending its applicability beyond Iran to various economic and policy contexts in disaster risk management.