AIR pioneered the catastrophe modeling industry in the mid 1980s when it introduced the AIR U.S. Hurricane Model—the first probabilistic model of its kind. Today, AIR’s U.S. hurricane model is the most rigorously tested and extensively reviewed model on the market. In 1996, it became the first hurricane model to meet all the rigorous standards of the Florida Commission on Hurricane Loss Projection Methodology, and it has been certified for use in Florida residential ratemaking every year since. In 1997, it was the model of choice for the first truly successful catastrophe bond transaction, and it has since been used to support a wide variety of innovative insurance-linked securitizations representing billions of dollars.

Global Reach

Tropical cyclone risk, however, is not confined to the U.S. AIR estimates that average annual aggregate insured losses from tropical cyclones worldwide approach $15 billion, and a significant proportion of those are incurred in the Asia-Pacific region. In fact, the Northwest Pacific basin is the most active in the world. On average, as many as 11 tropical cyclones affect China every year, where even weak-wind typhoons can produce catastrophic flooding well inland. Japan, too, is at significant risk, with some of the largest coastal concentrations of property value anywhere in the world.

Mexico is exposed to hurricane risk from two ocean basins and it is important, when modeling Mexico’s tropical cyclone risk, to develop an integrated view of the region—one that explicitly accounts for the correlation between activity in the two ocean basins.

AIR tropical cyclone models incorporate detailed building inventory databases unique to each country. The models’ damage functions capture the response of those buildings to wind and, in some cases, precipitation-induced flooding and storm surge.

Offshore Assets

Neither is tropical cyclone risk confined to onshore properties. In 2008 AIR released the U.S. Hurricane Model for Offshore Assets, which captures the effects of both wind and waves on oil and natural gas platforms and rigs in the Gulf of Mexico. The model supports a variety of coverages and policy conditions unique to this risk.

Hurricane Risk in a Changing Climate

AIR meteorologists and climate scientists are also engaged in cutting edge research into the climatological influences on tropical cyclone activity. While the attention of the wider scientific community has focused primarily on the effects of climate on hurricane activity in the open ocean, AIR is leading the way in quantifying the impact of changing sea surface temperatures on hurricane landfall activity and of course, ultimately, on insured losses.

AIR currently offers tropical cyclone models for:

Listed below are additional materials of interest to organizations exposed to tropical cyclone risk: