Winter storms are the latest peril added to the catastrophe-modeling capabilities of AIR Worldwide Corp., the Boston-based catastrophe-modeling firm. The new risk is added to the list of already too familiar dangers--hurricanes, earthquakes, terrorism and severe thunderstorms. Not only does it refine our 10 safest cities list, it can help you determine just how safe from catastrophes your business' location really is.
Winter weather events--ice storms in the southeast, nor'easters in the northeast, wind storms in the northwest--are a nationwide phenomena. Their widespread effect explains how they have inflicted more than $17 billion in total losses to the insurance industry since 1990. And it explains why AIR's clients have requested a tool to understand their winter-weather exposure.
"It's a significant loss driver for our clients," says Dr. Peter Dailey, AIR's manager of atmospheric science and chief architect of the model. "It's the one remaining atmospheric peril for the United States that we weren't yet modeling."
AIR has been working eight years on the complex technology that goes into estimating the frequency and severity of winter storms. Dailey and his team of atmospheric scientists have utilized so-called Numerical Weather Prediction. Applied by meteorologists around the world to produce your typical five-day forecasts, NWP produces a three-dimensional view of the atmosphere--including temperature, moisture and pressure. AIR pioneered the application of NWP for risk modeling first in their European winter storm model, released in 2000.
NWP is as complex as it sounds. For AIR, it involved extensive investment to build a super-computer network and develop the staff to harness it. But the technology has allowed AIR to produce a model that can take in historical loss and meteorological data and, roughly speaking, spit out the risk potential for insurers and businesses from various winter-storm scenarios.
"We're simulating the impact of three components--wind, snow and temperature--on properties," says Dailey. The results come as probabilities that your facility will suffer wind strong enough to damage your siding, for instance, or a "snow load" on your office heavy enough to collapse its roof. The model can even estimate potential damage from downed trees, ice dams, power outages and burst pipes.
Damage from ice, wind and snow may seem minor on a local level, but when added up across the country, losses can loom large. There have been six winter storms in the last decade with bills of $1 billion or more. The frequency of large losses seems to be increasing.
Of course, winter storms may not get the credit they deserve. Hurricanes are a hard act to follow. As Katrina, Rita and Wilma have shown during the last season, tropical cyclones are one of the most destructive forces that businesses can face. Just ask your carrier.
AIR and other modelers have put years into their hurricane modeling tools, involving analysis of historical losses and meteorological information, the addition of new scientific findings, and extensive damage surveys after catastrophes.
The level of assessment is similar for earthquakes. Models for these natural disasters are based on data from past events, including measurements from a worldwide network of instruments and even accounts from newspaper and diary, as well as information provided by samples of ancient soil and rock layers--so-called paleoseismic data.
Or take the thunderstorm model. AIR engineers wrap their minds around historical data from 39,000 tornadoes, 108,000 hailstorms and 145,000 straight-line windstorms. They create one kilometer square grids to model with--about 7 million grids for the United States in all.
With the use of these catastrophe models, says Dr. Jayanta Guin, vice president for research and modeling at AIR, the areas facing the highest potential losses from such threats as can be identified, providing companies with a clear understanding of the risks they face.
December 1, 2005
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