SUMMARYLoss ratio, which is the ratio of the repair cost to the total replacement cost, is an effective parameter for representing structural and nonstructural damage caused by earthquakes. A probabilistic loss estimation framework is first presented that directly relates hazard to response and hence to losses. A key feature of the loss estimation approach is the determination of losses without need for customary fragility curves. Relationships between intensity measures and engineering demand parameters are used to define the demand model. An empirically calibrated loss model in the form of a power curve with upper and lower cut‐offs is used in conjunction with the demand model to estimate loss ratios. Loss ratios for each of the damage states take into account epistemic uncertainty and an effect on price surge following a major hazardous event. The loss model is calibrated and validated for bridges designed based on the prevailing Caltrans, Japan, and New Zealand standards. The loss model is then transformed to provide a composite seismic hazard–loss relationship that is used to estimate the expected annual loss for structures. The closed‐form four‐step stochastic loss estimation model is applied to the bridges designed for ductility. Results of these ductile designs are compared to a bridge detailed to an emerging damage avoidance design philosophy. Copyright © 2011 John Wiley & Sons, Ltd.