AIR unveils Thunderstorm model for Australia

Catastrophe modelling firm AIR Worldwide has released what it claims is the first severe thunderstorm model for Australia to capture all three sub-perils – hail, tornado and straight-line wind.

The model produces daily simulations based on statistical modelling combined with historical data provided by Australia’s Bureau of Meteorology, along with local and seasonal weather patterns.

This approach is designed to capture large outbreaks that cause insured losses in excess of A$10m, the ICA threshold for a catastrophe, as well as smaller and more localised events that may only last a day but can still cause economic losses when aggregated during the course of a year.

Capturing sub-peril-specific effects and using methodology that groups them into spatially coherent patterns, AIR said its models provide more accurate loss estimates compared to ones that use random sampling alone.

“In Australia, insurance losses from severe thunderstorms are greater than those from other natural perils such as earthquakes, tropical cyclones, bushfires, or floods,” said Dr Eric Robinson, manager and principal scientist, AIR Worldwide.

“Because aggregate losses from severe thunderstorms can result in extreme volatility in financial results, a robust view of the risk is critical for organisations developing resilience strategies.”

Loss potential is increasing as property replacement values rise in the densely populated cities of Australia, and the number of insurable exposures continues to grow as development expands into previously unpopulated areas, said Dr Robinson.

In addition, the damaged caused by cyclone Debbie, which hit the Queensland cost in late March this year and is estimated to cause more than $1.4bn in insured losses, has thrown the spotlight on the risk posed by natural disaster and the need for effective modelling.

“Insurers are looking for innovative tools that can help them better manage this growing risk by capturing the impact of both large and small loss-causing events, as well as accounting for the highly localised effects of straight-line winds, hail, and tornadoes,” said Dr Robinson.