AIR launches Japan inland flood model, updates Japan typhoon model

Risk  modelling company AIR Worldwide has announced the launch of an inland flood risk model for Japan, as well as updates to its Japan typhoon risk model, both of which will be useful to reinsurance and ILS funds as they look to the country to underwrite diversifying perils.

The new inland flood model for Japan and the latest typhoon risk model are both included in Version 5.1 of AIR’s catastrophe modeling software platform, Touchstone.

“Until now, the industry has lacked the tools to effectively quantify inland flood risk in Japan,” commented Dr. Jayanta Guin, chief research officer at AIR Worldwide. “We’re excited to add Japan to our growing portfolio of high-resolution flood models. The model represents another step forward in helping the industry manage this complex risk by better understanding the severity, frequency, and loss potential of extreme flood events in Japan.”

Japanese flooding risk is often intrinsically linked to tropical weather systems and typhoons. For the ILS and collateralized reinsurance market, most of its exposure to Japanese floods comes via the typhoon peril. Even some Japan typhoon catastrophe bonds include exposure to rainfall induced flooding. So these catastrophe model updates will be useful to those looking to Japan for diversifiers.

However the flood peril in Japan is also non-tropical in nature, which could offer opportunity to ILS funds looking to underwrite more in the region.

AIR said that its new Inland Flood Model for Japan simulates the effects of on- and off-plain inland flooding from sources other than tropical cyclones, as non-tropical systems account for 40% of flood losses in Japan.

The new probabilistic flood model for Japan generates flood events using a large-scale hydrological model that simulates continuous surface runoff and river flows. Cleverly, the model uses a method that learns the patterns of precipitation from observed tropical cyclone and non-tropical cyclone systems, meaning it should improve its output with time and experience.

Taken into account are factors such as river shape, dams, levees, and other structures when calculating discharge at each location along the river network. It even explicitly accounts for factors such as lake and dam storage and soil saturation, which can worsen flood conditions.

AIR said that its inland flood model can be used along with its Japan typhoon model to develop a complete understanding of flood risk for Japan, tropical and non-tropical. The model has been updated with a brand new typhoon-induced precipitation module and also captures wind and storm surge risks.

The new and updated Japanese risk models have been released in Touchstone 5.1, which also includes a variety of enhancements to elements such as the geospatial module. In addition, an enhanced architecture means faster analysis run times in the latest update to Touchstone and user interface updates mean clients can utilise maps for advanced visualisations.

Additionally, the latest Touchstone has better mapping tools and third-party data connectivity, meaning data from sources such as the National Oceanic and Atmospheric Administration (NOAA), Federal Emergency Management Agency (FEMA), and other GIS data providers can be brought directly into the system.

“Touchstone is fast becoming the industry’s preferred catastrophe modeling application, and now, on our fifth full release, we’re excited to bring new enhancements to the usability and functionality of the software,” commented Rob Newbold, executive vice president at AIR Worldwide. “These latest updates will continue to simplify companies’ risk management workflows while also helping them develop their own view of risk in one easy-to-use, comprehensive risk management platform.”

The Japan typhoon and inland flood models are also available in AIR’s CATRADER tool, which enables analysis of reinsurance contracts, industry loss warranties (ILW), and insurance-linked securities (ILS).