AIR Worldwide Analysis Determines Potential Impact of Climate Change on Insured Losses

BOSTON, Jun. 29, 2005 — An analysis AIR Worldwide Corporation (AIR) conducted for the Association of British Insurers (ABI) determined that if U.S. hurricane wind speeds increased by as little as 6 percent on average, insured losses could increase by as much as 75 percent per year. AIR's analysis was conducted for the ABI's special report called "The Financial Risk of Climate Change," which was released today at an ABI-sponsored conference in London. AIR also analyzed the potential impact of increased typhoon intensity in Japan and windstorm frequency in Europe on estimated insured losses.

According to the ABI report, possible impacts of climate change include an increase in tropical cyclone storm intensity and European windstorm frequency. The ABI asked AIR to determine the impact of these potential changes in storm characteristics on insured losses.

"The causes and effects of climate change are still the subject of much debate within the scientific community," said Dr. Jayanta Guin, vice president of research and modeling, who headed up AIR's analysis. "While there are certainly ways in which global warming could potentially affect the frequency and severity of tropical and extratropical cyclones, there is still no scientific consensus on what the impact will be. What is clear, however, is that the relatively small increase in average wind speeds predicted by some scientists would produce a significant increase in insured losses."

The AIR analysis determined that a 6 percent increase in average wind speeds from tropical cyclones, such as U.S. hurricanes and Japan typhoons, could result in as much as a 60–75 percent increase in insured losses per year. A 20 percent increase in the frequency of major European windstorms could result in as much as a 35 percent increase in average annual insured losses.

"While the results from increased storm frequency should not be surprising, the large increases in losses from a small increase in wind speeds may be less intuitive," said Dr. Guin. "From an engineering perspective, however, it comes as no surprise. Property damage can increase at almost exponential rates once certain wind thresholds are reached."

About AIR Worldwide Corporation
AIR Worldwide Corporation (AIR) is a leading risk modeling company helping clients manage the financial impact of catastrophes and weather. Utilizing the latest science and technology, AIR models natural catastrophes in more than 40 countries and the risk from terrorism in the United States. Other areas of expertise include site-specific seismic engineering analysis, catastrophe bonds and property replacement cost valuation. A member of the ISO family of companies, AIR was founded in 1987 to provide its insurance, reinsurance, corporate and government clients a complete line of risk modeling software and consulting services that produce consistent and reliable results. Headquartered in Boston, AIR has additional offices in North America, Europe and Asia. For more information, please visit www.air-worldwide.com.

About ISO
ISO is a leading provider of products and services that help measure, manage and reduce risk. ISO provides data, analytics and decision-support solutions to professionals in many fields, including insurance, finance, real estate, health services, government and human resources. Professionals use ISO's databases and services to classify and evaluate a variety of risks and detect potential fraud. In the U.S. and around the world, ISO's services help customers protect people, property and financial assets.

Release: Immediate

Contacts:
Giuseppe Barone / Erica Helton
MWW Group (for ISO)
201-507-9500
gbarone@mww.com / ehelton@mww.com

Michael Gannon (AIR)
(617) 954-1857
mgannon@air-worldwide.com

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