AIR Releases New Northwest Asia-Pacific Area Wide Typhoon Model

March 31, 2011

Catastrophe modeling firm AIR Worldwide has released an enhanced typhoon model for the Northwest Pacific Basin. AIR said the “model, which was released in Version 12.5 of AIR’s CLASIC/2™ and CATRADER® software, features a comprehensive catalog of simulated storms to provide the most complete and scientifically rigorous view of typhoon risk affecting Japan, mainland China, the Philippines, Hong Kong, Taiwan, and, with this latest release, South Korea.”

Dr. Jayanta Guin, senior vice president, research and modeling, at AIR Worldwide, explained that “more than half of all typhoons in the Asia-Pacific region impact more than one country. The updated basinwide catalog will allow insurers and reinsurers to more accurately model losses to policies and portfolios that span multiple countries, thereby capturing loss correlations in a physically realistic way.”

The model also covers “precipitation-induced flooding,” which, AIR points out, “can be a significant component of insured typhoon losses in the region. For example, Typhoon Tokage in 2004 resulted in 187 billion JPY [$2.257 billion] in insured losses in Japan, and more than 40 billion JPY [$482 million] of the total insured losses came from flood alone.

“In Version 12.5 of CLASIC/2 and CATRADER, precipitation-induced flood damage is explicitly modeled in all supported countries. Additionally, in CLASIC/2, users can assess their losses in Japan separately for wind and flood or for the two perils combined — an essential feature given that standard policy conditions for the two perils can differ considerably.”

In constructing the enhanced model AIR analyzed a “significant amount of property claims data from insurers and reinsurers in each of the local markets in Asia.” It said the “findings from this data were used to test and validate the new models to reflect actual events in the region more accurately. In addition to actual property and loss data, AIR has collected detailed wind and precipitation data. Based on having the most complete claims, wind, and precipitation data, the model’s wind and precipitation damage functions have been enhanced for Japan and China.

Other enhancements to AIR’s Northwest Pacific Basin typhoon model include the following:
• Support for additional lines of business: The model now estimates typhoon losses to marine cargo in Japan and autos for all countries. Those additions will enable companies to more accurately estimate potential losses by line of business, as marine and auto damage can be significant during typhoons. For instance, Typhoon Songda in 2004 caused more than 20 billion JPY in auto damage in Japan.

• The ability to capture EAR (Erection-at-Risk)/CAR (Construction-at-Risk) for buildings and properties throughout the Northwest Pacific Basin: In China, especially, the rapid growth of development in the country has created a vital need to account for losses of developments as they are being built.

• Improved model resolution: High-resolution land-use and topographic data enables more precise estimates of wind speeds and precipitation at the location level. The enhanced resolution allows for improved modeling in CLASIC/2, which uses sophisticated techniques to distribute aggregate exposure data to a finer resolution in accordance with industry distributions of insured exposures.

• Addition of South Korea: The enhanced model now includes South Korea, for which separate vulnerability functions have been developed for wind and typhoon precipitation-induced flooding for building, contents, and time element coverages. Damageability is dependent upon building attributes such as occupancy, construction, and height. For all countries, the model accounts for the duration of damaging winds, regional construction practices, and public flood defense systems.

• Improved storm transitioning: AIR has enhanced the model to account for extra tropical transitioning, which more accurately accounts for the storm’s potential path and area of precipitation and wind cover. The model accurately considers storms that broaden their precipitation shield in a way that results in much greater precipitation over a larger area and at a given location.

• Version 12.5 of AIR’s CLASIC/2 also offers a streamlined approach to modeling complex policy conditions commonly found in Japan and allows extra expense and debris removal terms to be explicitly defined.

Source: AIR Worldwide

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