Risk modeller AIR Worldwide have announced the release of a new tropical cyclone model for Central America. The new model covers Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama offering modelling technology for the effects of both wind and precipitation induced flooding which are the two main causes of damage from tropical storms in the Central American countries.
“AIR has undertaken a concentrated effort to serve the needs of the expanding insurance market in Central America,” said Dr. Jayanta Guin, senior vice president of research and modeling at AIR Worldwide. “The AIR tropical cyclone model for Central America leverages the same basinwide catalog of simulated storms as AIR’s models for the United States, Mexico, the Gulf of Mexico, and the Caribbean to enable more accurate analysis of policies and portfolios spanning multiple countries in this region.”
The flood component of the model is vital for Central America as tropical storms often cause substantial damage even after their wind speeds have dropped following landfall. Central America is extremely exposed to flooding and effects such as landslides due to the topography of the landscape. AIR’s model includes high resolution elevation and soil data to simulate tropical cyclone induced flooding in the region.
AIR have also updated their Caribbean tropical cyclone model today and that now includes a precipitation module for flooding caused by tropical storms. “Tropical cyclones in the Caribbean—even those with relatively low wind speeds—can be accompanied by significant flooding, exacerbated by the inland mountains that characterize many islands in the region,” continued Dr. Guin. “Hurricane David  is an important example of a multibillion-dollar loss for which flood losses exceeded wind losses.”
These advancements in the AIR suite of tropical cyclone models could prove extremely useful for the creation of parametric insurance products to cover flooding risks in Central America and the Caribbean, such as the rainfall product that the Caribbean Catastrophe Risk Insurance Facility (CCRIF) are working on. They could, of course, also be utilised for catastrophe bond transactions in the region as well.