Catastrophe Risk

AIR Worldwide Corporation, an ISO subsidiary, is the technological leader in catastrophe risk modeling. AIR provides extensive data and modeling to assess the risks from potential catastrophes, terrorist attacks, hurricanes, earthquakes, weather, and other natural and man-made hazards. AIR models can help government organizations identify, quantify, and plan for the consequences of catastrophes.

Modeling pioneers
AIR pioneered the probabilistic catastrophe modeling technology that revolutionized the way insurance and reinsurance companies and, increasingly, government and corporate risk managers assess and manage catastrophic risk. AIR models and software tools set the standard for analyzing potential losses and developing risk-management strategies.

AIR models establish risk measures at the national, regional, and local levels. Drawing on simulations of threats and the forces generated in catastrophic events, the models compute physical damage and consequences to property and people.

How government and industry use the models

• Government users in the homeland security community use model results to allocate resources, help decision makers prepare for a range of possibilities, and identify vulnerabilities.

• AIR has recently provided the Department of Homeland Security with combined-peril consequences in terms of average annual losses by metropolitan area. That information assists the agency in resource allocation.
• Government agencies have used AIR risk analyses to quantify the consequences of specific catastrophic scenarios; identify worst-case scenarios for specific regions; and evaluate the overall catastrophe risk for regions, states, counties, cities, postal codes, and properties.
• Using advanced techniques for weather prediction, AIR has recently implemented the first commercial applications of global climate modeling for weather risk management in the insurance, financial, energy, and agriculture industries. Companies use those AIR applications to forecast weather for planning purposes. For example, if the Northeast expects warmer-than-normal conditions, an electric utility can plan its energy trading strategy for the coming winter.

AIR databases, together with other ISO data products, provide the basis for a detailed risk profile for all U.S. locations. A risk profile can include distance to coast, distance to nearest earthquake fault, and distance to nearest potential terrorist target. AIR data includes characteristics and estimated replacement values for nearly all commercial and residential structures.

An AIR study on catastrophe risk modeling
Catastrophe risk modeling is a key element of risk management. Catastrophe models examine accumulations of risk, measure and identify worst-case losses, assess relative risk across different geographic areas, and measure the probability of loss for property and lives.

In 2002, AIR extended this proven methodology for modeling losses from natural catastrophes to address threats, vulnerabilities, and consequences related to terrorism. Modeling the impact of terrorism begins with listing potential events and their possible locations. Using detailed data describing the properties and populations at the street-address level, the model performs simulations to determine the effect of various weapons on property and people. The model translates damage and injury consequences to costs based on actuarial analysis of historical claims data.

AIR applies consistent risk metrics across multiple natural and man-made perils to help your organization make informed decisions on how to allocate resources for catastrophe prevention and mitigation.

Follow the link to learn more about AIR’s presentation on Catastrophe Risk Modeling Applications to Homeland Security and Defense. The presentation describes the modeling technology and underlying data, discusses uncertainty, provides illustrations of applications, and highlights key issues of concern to communities and government agencies.

AIR modeling technologies continue to fulfill expanding risk-management needs around the world.