EQECAT

Between April 25 and 29, 2011, the U.S. recorded 305 tornadoes.  Three hundred and four people died in tornadoes between April 27-28, 2011.  Allstate's castrophe losses are estimated at $1.4 billion last month for over 100,000 claims.  In 2010, tornadoes resulted in 45 fatalities, 699 injuries, and $1,134.56 million in damages.  Looking at the data in the May 9, 2011 issue of Bloomberg Businessweek (Disaster Zones), rip currents produced the most deaths in 2010 in the natural disaster category (64), tornadoes produced the most injuries (699), and river flooding had the greatest damage dollar value ($4,195.72).  This year we have seen the convergence of both historical serve weather activity and flooding along the Mississippi River.

One firm specializes in the damage estimating business.  Based in Oakland, CA - - EQECAT builds software to help insurance companies "quantify exposure" to natural and man-made disasters.  Based on how powerful a tornado was, how long it stayed on the ground, how wide it was, EQECAT estimates what it did to buildings or crops in its path.  This looks like a growth business to me - - consider the following historical data on tornado damage:

2008 - - $1,863.8 million

2007 - - $1,407.5

2006 - - $759.0

2005 - - $503.9

2004 - - $549.2

2003 - - $1,281.5

2002 - - $802.1

2001 - - $637.5

2000 - - $430.5

Catastrophe Risk Models will intersect with many areas of engineering in the near future.  The bulk of this new intersection will be driven by extreme weather changes and events produced by global climate change.  Every engineering design has its limitations and its breaking points.  Catastrophe Risk Models are just another layer and tool for engineers who are probably already very comfortable with the ideas of technical risk, cost risk, and schedule risk.

Catastrophe risk modeling typically has four elements - - (1) Hazard - - Probability, location, magnitude, and duration; (2) Exposure - - Location, construction, age, and building code; (3) Damage - - Physical damage and repair costs; and (4) Insured Loss - - Items of coverage.  The core of the software is the hazard or damage algorithms, where standardization, flexibility, transparency, and verification are key quality attributes.  Weather hazards in Catastrophe Risk Models have included hurricanes, tornadoes, hail, European wind storms, wildfire, floods, and winter storms (snow, ice freezing).  Climate change in risk models is just beginning to be incorporated.  The future will include - - better risk linkages between hurricanes and climatology; the risk of rising sea levels; storm waves and surges in coastal areas.  Look for models to support the improved policy relevance of climate change scenarios and changes to the frequency of weather related extreme events.