AIR provides catastrophe risk modeling solutions that make individuals, businesses, and society more resilient.
Press Release

New model explicitly captures all three sub-perils—hail, tornado, and straight-line wind

BOSTON, July 24, 2017 — Catastrophe risk modeling firm AIR Worldwide today announced that it has released the industry’s first comprehensive severe thunderstorm model for Australia that explicitly captures all three sub-perils—hail, tornado, and straight-line wind to help companies assess and manage severe thunderstorm risk. AIR Worldwide is a Verisk Analytics (Nasdaq:VRSK) business.

“In Australia, insurance losses from severe thunderstorms are greater than those from other natural perils such as earthquakes, tropical cyclones, bushfires, or floods,” said Dr. Eric Robinson, manager and principal scientist, AIR Worldwide. “Because aggregate losses from severe thunderstorms can result in extreme volatility in financial results, a robust view of the risk is critical for organizations developing resilience strategies.”

The AIR Severe Thunderstorm Model for Australia simulates daily severe thunderstorm activity based on historical occurrence rates and local and seasonal weather patterns. The daily simulation enables the model to capture both the large outbreaks that produce insured losses in excess of AUD 10 million—the ICA threshold for a catastrophe—and smaller events that may last only one day, but that could still impact a company’s portfolio on an aggregate basis, or a more rural portfolio on an occurrence basis.

The AIR model utilizes historical data from Australia’s Bureau of Meteorology (BOM) Severe Storms Archive, which comprises storm reports from a trained weather spotter network. To compensate for inherent bias from eyewitness reporting of the historical data, AIR employed a hybrid physical-statistical method to simulate hail, straight-line wind, and tornadoes in physically realistic locations, including areas that may not have experienced major activity in the brief historical record. This method blends information about atmospheric conditions conducive to severe thunderstorms with BOM storm reports data, resulting in a spatially complete catalog of simulated events that offers companies a more accurate view of their severe thunderstorm risk.

Thunderstorm weather systems can last for several days and affect multiple states, but the individual tornadoes, hail swaths, and straight-line wind swaths (the “sub-perils”) that make up an outbreak may last for just minutes and affect highly localized areas. To capture the localized effects, AIR developed high-resolution event footprints specific to each sub-peril. Additionally, because hailstorms, tornadoes, and straight-line windstorms inflict damage differently, the model’s damage functions are sub-peril-specific to provide more accurate loss estimates.

The model also simulates realistically clustered severe thunderstorm outbreaks using methodology that groups hail, wind, and tornadoes into spatially coherent patterns—patterns that would not be possible using random sampling alone.

Dr. Robinson continued, “Loss potential is increasing as property replacement values rise in the densely populated cities of Australia, and the number of insurable exposures continues to grow as development expands into previously unpopulated areas. Insurers are looking for innovative tools that can help them better manage this growing risk by capturing the impact of both large and small loss-causing events, as well as accounting for the highly-localized effects of straight-line winds, hail, and tornadoes. Our new model does this by integrating statistical modeling with the latest meteorological research.”

A new suite of models for Australia (including the severe thunderstorm model and updated models for tropical cyclone, earthquake, and bushfire) is currently available in the CATRADER® Version 19 and Touchstone® 5.0 catastrophe risk management systems. In addition to new and updated models, Touchstone 5.0 features a variety of enhancements to support more streamlined multitasking, and new options for generating and working with loss results.

About AIR Worldwide


AIR Worldwide (AIR) provides risk modeling solutions that make individuals, businesses, and society more resilient to extreme events. In 1987, AIR Worldwide founded the catastrophe modeling industry and today models the risk from natural catastrophes, terrorism, pandemics, casualty catastrophes, and cyber attacks, globally. Insurance, reinsurance, financial, corporate, and government clients rely on AIR’s advanced science, software, and consulting services for catastrophe risk management, insurance-linked securities, site-specific engineering analyses, and agricultural risk management. AIR Worldwide, a Verisk Analytics (Nasdaq:VRSK) business, is headquartered in Boston with additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.


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