Insurance companies are well equipped to manage the potential losses associated with claims from individual fires and automobile accidents. There exists a wealth of historical data associated with such losses that enable actuaries to determine what future losses are likely to be with a high degree of confidence. The relative infrequency of catastrophe events, however, and the resulting scarcity of historical loss data make it virtually impossible to reliably estimate potential future catastrophe losses using standard actuarial techniques.
That’s why, in the mid 1980s, AIR introduced to the insurance industry the first fully probabilistic catastrophe model capable of providing credible, scientifically based loss estimates for thousands of potential scenarios representing the complete probability distribution of losses—including losses for the most extreme events and extreme years that may not have occurred historically.
Today, the catastrophe modeling technology that was pioneered by AIR is used by almost all reinsurers and many insurers around the world. But it is no longer only the insurance industry that relies on AIR modeling. Applications of the technology have since broadened to serve corporate risk managers, investors, mortgage underwriters, government officials, and a wide variety of other stakeholders exposed to catastrophe risk.
Scientific Rigor and Transparency
AIR’s approach to catastrophe modeling is one of both scientific rigor and transparency. The most important job of our scientists and engineers is to keep abreast of the scientific literature, evaluate the latest research findings, and conduct original research of their own. In doing so, AIR's highly credentialed research team ensures that our models incorporate the most current scientific knowledge in climate science, meteorology, hydrology, seismology, and wind and earthquake engineering.
AIR is also committed to eliminating the perception that catastrophe models are “black boxes.” AIR produces thousands of pages of model documentation that include explicit scientific formulae, detailed descriptions of analytical techniques and validation, and references for source documents. Our scientists and engineers are available to review all aspects of the models with our clients, state departments of insurance, rating agencies and perhaps most importantly peer reviewers.
AIR models currently cover more than 90 countries throughout North America, the Caribbean, South America, Europe, and the Asia-Pacific region.
Learn about our approach to modeling: