Catastrophe risk modeling firm AIR Worldwide released an update to its Extratropical Cyclone Model for Europe. Virtually every component of the model has been enhanced through the incorporation of significant quantities of wind speed observations and claims data from recent storms, coupled with state-of-the-art modeling techniques, AIR says. The update also incorporates the results of engineering studies that capture the effects of the regional building codes and construction practices on building vulnerability.

AIR updated its catalog of simulated storms to better reflect the clustering of storms as they occur within a season. Its scientists employed a "block bootstrapping" technique that employs historical data to generate more realistic simulated storm patterns than traditional approaches employed to model storm occurrence. As a result, AIR ays the model better captures the cumulative effects of multiple storms occurring in succession or concurrently over the same region, while more accurately modeling the impact of smaller individual storms.

"AIR pioneered the application of Numerical Weather Prediction (NWP) technology to realistically capture the complex structure of these storms that lead to more accurate surface winds, and now has more than 10 years of experience using NWP to model this peril," said Dr. Jayanta Guin, SVP of research and modeling at AIR Worldwide. "AIR's fourth-generation pan-European ETC model incorporates more physically realistic simulations of individual storms and explicitly models storm clustering to provide more credible occurrence and aggregate loss estimates."

Another enhancement to the model's hazard module is the use of an advanced technique to translate wind speeds aloft to the surface. This process uses the latest land use land cover (LULC) data and high-resolution terrain maps combined with actual statistics from hundreds of local wind stations to yield realistic, high-resolution modeled winds at the surface, where they may result in damage to insured properties. These updates provide the model with a much higher degree of fidelity than can be attained using conventional approaches, AIR says, particularly in coastal and mountain regions prevalent in the Netherlands, France, Switzerland and the United Kingdom.

Based on extensive research, engineering studies, and post-disaster survey and claims data analysis, AIR engineers have developed damage functions for 30 different construction classes and nearly 50 occupancy classes. The damage functions account for building characteristics such as height and reflect regional differences in building codes and construction practices.

The Version 12.0 update to the European ETC model also includes additional coverages and lines of business. It also features an enhanced methodology for estimating insured losses resulting from the interruption of business operations that takes into account such factors as the construction type and the occupancy class. Additional lines of business include automobiles for all modeled countries, as well as forestry for Sweden and Norway.

"To ensure the most robust and scientifically rigorous model possible, each component was independently validated using multiple sources; for example, the distribution of each storm characteristic in the catalog of simulated events is carefully compared against historical storm data, and modeled wind fields are validated against wind speed observations from actual storms," added Dr. Guin. "Modeled losses have been validated using more than 3 billion Euros of claims data from more than 11 historical storms spanning from 1990 to 2009."

In concert with the model update, the AIR industry exposure database (IED) for Europe has also been updated to better reflect the current mix of residential and commercial exposures and has been validated using detailed company data. AIR builds its industry exposure databases from the bottom-up, compiling detailed data about risk counts, building characteristics, as well as replacement values and information on standard policy terms and conditions, it says. Rather than relying on aggregated insurance company data, AIR industry exposure databases leverage the best-available public and private data sources. When detailed, location-specific exposure data is not available, companies can leverage the IED using CLASIC/2, AIR's detailed modeling system, to disaggregate their coarse resolution data to a higher resolution to more accurately reflect the spatial distribution of insured properties. This allows for consistent modeling within and between countries, which is particularly important for modeling extratropical cyclone risk in Europe.

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