BOSTON, July 25, 2011 – Catastrophe risk modeling firm AIR Worldwide (AIR) has released the Central America tropical cyclone model. The new model covers Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. The model captures the combined effects of wind and precipitation-induced flooding to provide a complete and scientifically robust view of Central American tropical cyclone risk.
“AIR has undertaken a concentrated effort to serve the needs of the expanding insurance market in Central America,” said Dr. Jayanta Guin, senior vice president of research and modeling at AIR Worldwide. “The AIR tropical cyclone model for Central America leverages the same basinwide catalog of simulated storms as AIR’s models for the United States, Mexico, the Gulf of Mexico, and the Caribbean to enable more accurate analysis of policies and portfolios spanning multiple countries in this region.”
A tropical cyclone produces strong winds and heavy rain and, depending on its location and strength, is referred to as a hurricane, typhoon, tropical storm, or tropical depression. While tropical cyclone wind is a well recognized source of damage, tropical cyclones in this region—even those with relatively low wind speeds—can also 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 affect vast areas and generate substantial rainfall have the potential to produce significant insured losses.
The AIR model’s flood component incorporates high-resolution elevation and soil data to simulate tropical cyclone-induced flooding. The impact of flooding is estimated using the accumulated runoff, which is based on total precipitation produced by a simulated storm, topography, elevation, and the ability of local soils to absorb water.
Separate wind and flood damage functions have been incorporated for a wide range of occupancies and construction types, as well as contents and time-element coverage. AIR’s damage functions account for storm duration to reflect the increased damage that results from prolonged exposure to wind and rainfall and have been validated using detailed claims data.
Hurricane Mitch (1998), which was a very slow-moving storm that dropped historic amounts of rainfall in Honduras, Guatemala, and Nicaragua, exemplifies the high proportion of flood damage that may result from a tropical cyclone.
AIR’s Caribbean tropical cyclone model was also updated to provide comprehensive coverage of the Caribbean. The 28 territories included in the model are Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, Cuba, Dominica, the Dominican Republic, Grenada, Guadeloupe, Haiti, Jamaica, Martinique, Montserrat, the Netherlands Antilles, Puerto Rico, St. Barts, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Martin, St. Vincent and the Grenadines, Trinidad and Tobago, the Turks and Caicos Islands, and the U.S. Virgin Islands.
The tropical cyclone model for the Caribbean incorporates the latest land use and land cover data available on a high-resolution, 1-kilometer grid. The peer-reviewed model also features a precipitation module for modeling tropical cyclone–induced flooding for all islands in the Caribbean.
“Tropical cyclones in the Caribbean—even those with relatively low wind speeds—can be accompanied by significant flooding, exacerbated by the inland mountains that characterize many islands in the region,” continued Dr. Guin. “Hurricane David  is an important example of a multibillion-dollar loss for which flood losses exceeded wind losses.”
In both the Central America and Caribbean models, AIR employs a component-based approach to help insurers, reinsurers, brokers, and risk managers to better assess the catastrophe risk to industrial facilities. The approach determines the overall damageability of various kinds of industrial facilities based on the damageability of the various assets that compose different types of plants. For example, components such as flares or cooling towers may sustain fairly significant damage at a wind speed where pumps, transformers, or anchored tanks may remain almost unscathed.
The AIR tropical cyclone models for Central America and the Caribbean are currently available in Version 13.0 of the CLASIC/2TM, CATRADER®, and CATStation® catastrophe risk management systems.
About AIR Worldwide
AIR Worldwide (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 90 countries. More than 400 insurance, reinsurance, financial, corporate, and government clients rely on AIR software and services for catastrophe risk management, insurance-linked securities, detailed site-specific wind and seismic engineering analyses, agricultural risk management, and property replacement-cost valuation. AIR is a member of the Verisk Insurance Solutions group at Verisk Analytics and is headquartered in Boston with additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.