BOSTON, April 28, 2008 — AIR Worldwide Corporation (AIR) today announced the availability of the AIR tropical cyclone model for Mexico. The new probabilistic model will help the industry better manage hurricane and tropical cyclone risk in the growing Latin American insurance market. The unique feature of the AIR tropical cyclone model for Mexico is that it estimates insured losses from wind and flood to buildings, contents, and business interruption.
“On average, Mexico experiences almost two hurricane landfalls per year, which is similar to the United States,” said Dr. Tim Doggett, Senior Research Scientist at AIR Worldwide. “The most intense storms have the potential to cause significant insured losses when they make landfall in a highly developed area on Mexico’s coastline, as demonstrated by the $2 billion loss from Hurricane Wilma in 2005 and the $1 billion loss from Hurricane Gilbert in 1988, if it were to recur today.”
While damage from tropical cyclones is often thought of as being caused primarily by wind, this is not always the case in Mexico. Tropical cyclones in this region — even those with relatively low wind speeds — can be accompanied by significant flooding, which is typically covered under both residential and commercial insurance policies. Since precipitation from tropical cyclones can penetrate hundreds of kilometers inland, weak storms that impact vast areas and generate substantial rainfall have the potential to produce significant insured losses.
Mexico’s coastal mountains have a considerable impact on both the meteorological and hydrological aspects of landfalling cyclones. Mountains act as barriers to the flow of storms and impact the rate at which a landfalling storm will dissipate. Additionally, as winds from the cyclone are forced over the mountains, the lifting of the air increases the rainfall that the storm produces in that area.
The AIR model’s flood component incorporates high resolution elevation and soil data to simulate tropical cyclone induced flooding. The flood depth or accumulated run-off is estimated based on total precipitation produced by a simulated storm, the topography, elevation and the ability of local soils to absorb water.
The model includes a catalog containing more than 50,000 potential landfalling tropical cyclones, which range from tropical storms to intense hurricanes. Additionally, the model covers both the Atlantic and East Pacific basins and incorporates the negative correlation in tropical cyclone formation in the East Pacific and North Atlantic basins caused by the El Nino Southern Oscillation (ENSO).
To reflect the vulnerability of the Mexican building stock to wind and flood, AIR engineers developed separate damage functions for a wide range of occupancies and construction types, as well as contents and time element coverage. AIR’s damage functions also account for storm duration to reflect the increased damage that results from prolonged exposure to wind and rainfall.
“The AIR model embodies the most current research on meteorology, hydrology, and the vulnerability of structures to wind and flood,” continued Dr. Doggett. “It has been validated extensively using detailed claims data from a number of historical storms such as 2005’s Hurricane Wilma, which was the most intense hurricane ever recorded in the Atlantic basin.”
The AIR tropical cyclone model for Mexico is available immediately in AIR’s CLASIC/2™ and CATRADER® catastrophe risk modeling applications.
About AIR Worldwide Corporation
AIR Worldwide Corporation (AIR) is the scientific leader and most respected provider of risk modeling software and consulting services. AIR founded the catastrophe modeling industry in 1987 and today models the risk from natural catastrophes and terrorism in more than 50 countries. More than 400 insurance, reinsurance, financial, corporate and government clients rely on AIR software and services for catastrophe risk management, insurance-linked securities, site-specific wind and seismic engineering analyses, and property replacement cost valuation. AIR is a member of the ISO family of companies and is headquartered in Boston with additional offices in North America, Europe and Asia. For more information, please visit www.air-worldwide.com.
Kevin Long (AIR)