New Catastrophe Model Estimates Annual Losses in Excess of $5 Billion

September 8, 2000

Applied Insurance Research announced the release of a new severe thunderstorm model for the United States. The model incorporates sophisticated statistical techniques and the most current information about thunderstorm risk in the U.S.

“The perils associated with severe thunderstorms, including tornadoes, hailstorms and straight-line windstorms, are causing increasing property damage in the US,” said Karen Clark, AIR president and CEO.

“While individual event losses from these thunderstorm systems are generally not as high as from tropical cyclones, we estimate average annual aggregate losses to be nearly $5.3 billion, an amount higher than the average annual losses from hurricanes. Also, in recent years, we have seen several individual occurrences of thunderstorm systems resulting in losses in excess of $1 billion,” Clark added.

The newly released model represents a significant advance in severe thunderstorm modeling technology and replaces AIR’s previous “Other Wind” model. “The new model provides a more complete picture of severe thunderstorm risk, more realistic storm simulations at very high resolution and, in the end, even more reliable loss estimates,” said Dr. Greta Ljung, AIR senior research scientist. The new model operates at a geographical resolution of one square kilometer, which enables loss estimates down to the individual risk level.

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