Insurance Industry Funds Research to Quantify the “New Normal” of Tornado, Hail, and Wind Risk in the U.S. and Canada

August 15, 2013 / 4 min read

AER Emerging Risk research program will create new datasets and assess trends in risk due to climate change

Lexington, MA., August 15, 2013 - Atmospheric and Environmental Research (AER), a Verisk Analytics (Nasdaq:VRSK) company, announced today that its scientists have begun a new emerging risk research program entitled Climate Change: Tornado and Hail to quantify any shifts in the patterns of hazard related to severe thunderstorms in North America. The initiative is co-sponsored by a group of insurance industry and financial sector companies.

AER’s meteorological, remote sensing, and actuarial scientists are teaming with industry thought leaders to conduct an extensive historical analysis of thunderstorm wind, hail, and tornadoes to determine whether those perils are exhibiting a different frequency or severity than in the past. The AER research team is also assessing whether there is evidence of local influences on storm occurrence within different parts of a city. The AER Emerging Risk research study will focus primarily on tornadoes and hailstorms, which are of high interest to commercial lines and personal lines insurers in both the U.S. and Canada.

“Despite the considerable efforts and resources applied by the insurance industry toward fundamental research into emerging risks, there has been and will always be significant gaps between the scientific community and the insurance industry,” said John Seo, PhD, co-founder and managing principal, Fermat Capital Management. “AER has the technical expertise, the industry knowledge and, just as important, the operating model to close such gaps. Our particular motivation for participating in AER’s Emerging Risk research program is to enable us to identify new risk transfer opportunities and expand the insurance-linked securities market beyond conventional risks in a responsible way.”

“Roof-related claims have been a focal point for personal lines insurers during the past five years,” said Benjamin Rhodes, vice president of Personal Lines Product Management at The Hanover Insurance Group. “The new data resources that AER will be creating will improve our understanding of how changes in weather patterns, population growth, and construction characteristics can impact risk.”

“Hail risk is of critical concern to the Canadian insurance market,” said Jean Roy, vice president of Rating and Classification at TD Insurance. “AER’s plan for original research in Canada, inclusive of cloud seeding influences, will inform how our insurance products need to evolve in hail-exposed parts of the country.”

“Commercial and personal lines insurers and associated industries need better quantification of the changing landscape of tornado, wind, and hail risk,” said Julie Rochman, president and CEO of the Insurance Institute for Business & Home Safety (IBHS). “IBHS’s mission is to conduct objective, scientific research to promote effective actions that strengthen businesses and homes against severe storms, and AER’s research reinforces that objective by helping us understand the new normal, why these numbers are shifting and where they are trending.”

“AER’s research into the question of whether a changing climate is influencing severe thunderstorm risk is a welcome endeavor,” said Jayanta Guin, PhD, senior vice president at catastrophe modeling firm AIR Worldwide, a Verisk Analytics company. “I’m confident that the program’s findings will inform future generations of our U.S. and Canada severe thunderstorm models.”

“The supporters of the AER Emerging Risk research program share our strong belief that objective scientific research, when put specifically in the context of industry needs, can directly enhance business strategies,” said Kyle Beatty, senior vice president at AER. “Our focus on providing actionable data to our supporters on an ongoing basis, built off the foundation of original, peer?reviewed research, is what makes this program uniquely valuable.”

“Through Verisk’s work with the North American insurance market, we have observed weather claim activity from a unique position, which has inspired us to dive into the related science at a rigorous level,” said Mark V. Anquillare, executive vice president and chief financial officer at Verisk Analytics. “The data and resulting insights gained from this research will shape the way product managers and actuaries measure and manage the risk from these hazards.”

The Climate Change: Tornado and Hail research program is the second project in the Emerging Risk research program managed by AER for the insurance industry. AER’s scientists develop actionable data through original research that is conducted in-house, leveraging its extensive data warehouses and broad range of scientific experts. The first research initiative, which was summarized in a report published by Lloyd’s of London and co-authored by AER scientists, assessed the risk of covered loss due to widespread, long-duration power outages and resulted in a catalog of space weather blackout scenarios for the United States.

About Atmospheric and Environmental Research
Atmospheric and Environmental Research helps businesses and the government anticipate and manage climate- and weather-related risks. Energy, insurance, and manufacturing firms count on AER to help decrease their weather-related losses and improve productivity by integrating state-of-the-art climate science and weather information into their planning and decision processes. Government agencies such as NOAA, NASA, and the Departments of Defense and Energy rely on AER’s scientists to help solve weather- and climate-related problems of vital national importance in energy, environment, national security, and climate change. Established in 1977 and headquartered in Lexington, Massachusetts, AER is a Verisk Analytics (Nasdaq:VRSK) company. Please visit www.aer.com.

Release: Immediate

Contact:

Brenda Kelly
AER
781-761-2348
bkelly@aer.com