AIR Enhances Catastrophe Risk Model for Industrial Facilities

April 30, 2010

AIR Worldwide (AIR) has enhanced its catastrophe model for estimating property and business interruption losses for a wide variety of industrial facilities.

“AIR conducts detailed, site-specific, engineering-based risk assessments for various types of industrial facilities through our Catastrophe Risk Engineering (CRE) services,” said Dr. Akshay Gupta, principal engineer and director of the CRE practice at AIR Worldwide. “The in-depth knowledge gained from these assessments is now embedded in our catastrophe models to provide companies with a more detailed and complete view of risk to single facilities and large portfolios comprising a diverse set of facilities types and sizes.”

Larger, more complex industrial sites comprise various components that may behave very differently from one another when subject to the same hurricane wind speed or level of earthquake-induced ground shaking. For example, components such as flares, process towers, or cooling towers may sustain fairly significant damage at a particular wind speed, while pumps, transformers, or anchored tanks may remain almost unscathed.

AIR employs an component-based approach that determines the overall damageability of various kinds of industrial facilities based on the damageability of the assets that comprise the facility. Based on its CRE studies, AIR created engineering-based damage functions for nearly 400 components and subcomponents (for example, anchored and unanchored tanks with varying height-to-diameter ratios and fill levels) and the distribution of such assets in different types of industrial plants.

“Our site-specific studies provided us with a detailed understanding of the distribution of components by plant type, as well as differences in their physical characteristics and replacement values,” added Dr. Gupta. “Industrial plants often have similar components but in radically different proportions, so an accurate distribution of component classes within different plant types is essential for deriving the vulnerability of an entire plant.”

The upcoming version 12.0 release of AIR’s U.S. Hurricane and Earthquake models will also provide the ability to specify the various constituent components and subcomponents and their characteristics (e.g., anchorage or aspect ratios for tanks). This improved approach will help provide better loss estimates when the user has data about the component make-up of a particular facility, AIR says. If detailed data on the facility is not available, the model will use default breakdowns based on the type of industrial facility.

By considering the interconnectivity between components in a variety of product chains, AIR’s enhanced component-based methodology has also been extended to the assessment of business interruption (BI) loss for industrial facilities, the modeling firm said. Detailed, site-specific product and supply chain modeling is also available through AIR’s CRE practice.

AIR provides three options for companies that need to assess risk to industrial facilities with increasing precision: 1) using the enhanced, component-based damage functions and default component distributions by facility type in AIR’s updated catastrophe models; 2) specifying the actual component and subcomponent values for each facility in AIR’s updated catastrophe models; or 3) conducting an in-depth, site-specific, engineering-based risk assessment using AIR’s CRE services.

AIR’s CRE services, including site-specific risk evaluations, provide transparent and reliable loss estimates for an industrial facility and are being used by risk managers and brokers for risk assessment, mitigation, emergency response planning, and to facilitate decisions regarding insurance coverage.

Source: AIR Worldwide

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