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Natural catastrophes such as earthquakes, hurricanes, tornadoes, and floods can,
within minutes, put the financial well-being of an otherwise stable, profitable
company into jeopardy. Fortunately, such events are infrequent. But it is exactly
their infrequency that makes the estimation of losses from future catastrophes so
difficult.
The scarcity of historical loss data makes standard actuarial techniques of loss estimation inappropriate for catastrophe losses. Furthermore, the usefulness of the loss data that does exist is limited by the constantly changing landscape of insured properties. Property values change, along with the costs of repair and replacement. Building materials and designs change, and new structures may be more or less vulnerable to catastrophe events than were the old ones. New properties continue to be built in areas of high hazard. Therefore, the limited loss information that is available is not suitable for directly estimating future losses. AIR was the first company to develop catastrophe modeling technologies as an alternative to the actuarial and/or "rule of thumb" approaches that had been relied upon for the estimation of potential catastrophe losses. The technical expertise of our highly trained staff of seismologists, meteorologists, other physical scientists, engineers, mathematicians, and statisticians is augmented by the many years of experience that AIR has accumulated in this now rapidly developing field. The result is the delivery of reliable and credible loss estimates needed to make informed risk management decisions.
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