AIR, AEF Offer Insurers Option to Estimate Potential Hurricane Losses Based on Climate Forecasts

AIR Worldwide Corporation (AIR) and Accurate Environmental Forecasting Inc. (AEF) are offering companies the ability to estimate hurricane losses based on climate forecasts.

The new risk modeling capability, which combines AIR’s loss modeling technology and AEF’s expertise in forecasting the climate’s impact on hurricane risk, provides insurers and reinsurers with a risk assessment tool to manage hurricane risk for the forthcoming season.

“Anticipating the impact of current climate conditions can significantly improve seasonal hurricane risk assessment for insurers,” said Uday Virkud, senior vice president at AIR. “The new AIR-AEF offering provides insurers with valuable insight into which regions have a heightened risk of hurricane activity during the upcoming season. This should enhance insurers’ risk management strategies, allowing them to key in on locations where hurricane activity is most likely to deviate from the long-term average.”

AEF has developed a methodology to determine the change in probable hurricane activity based on evolving atmospheric and oceanic conditions. The methodology is captured in AEF’s Hurricane Index, which AIR uses to create an alternative, climate-conditioned catalog of potential hurricane activity.

The AEF Hurricane Index reflects fluctuations in climate signals, such as the El Nino Southern Oscillation (ENSO), the variability of sea surface temperatures in the tropical Atlantic, and the North Atlantic Oscillation (NAO), all of which can influence hurricane activity. Its development leverages more than 150 years of hurricane data from the National Hurricane Center’s Atlantic Hurricane Database.

“Our index captures the climate phenomena that can influence hurricanes impacting the coastal United States,” said Dr. Lewis Rothstein, AEF president and co-CEO. “Southeastern Louisiana, for example, is about 20% more likely to be hit by a tropical cyclone during El Nino years. Southeastern North Carolina is about 50% less likely to be hit by a tropical cyclone when an El Nino occurs in conjunction with low North Atlantic Oscillation conditions.”

The AEF forecasts can be accessed through AIR’s CLASIC/2 and CATRADER systems or on a service basis.