Catastrophe risk modelling specialist Karen Clark & Company (KCC) has launched Version 3.0 of its US Winter Storm Model, which captures two types of winter storms: extratropical cyclones (ETCs) and Arctic air outbreaks.KCC explained that North American ETCs are large low-pressure systems, such as Nor’easters, that cause damage primarily through strong winds and snow and ice accumulation.While Arctic air outbreaks, which are typically linked to high-pressure systems, occur when extremely cold polar air plunges south into the mid-latitudes, causing substantial damage due to long periods of sub-freezing temperatures.The cat risk modelling specialist also stressed that the severity of Arctic air outbreaks may increase as temperatures warm, driven by a phenomenon known as Arctic amplification.

“Scientists have observed that the Arctic is warming at a faster rate than the global average,” KCC said.A warmer Arctic reduces the temperature difference between the cold arctic air and the warm air in the mid-latitude regions, which ultimately weakens the polar vortex.When the polar vortex is weak, freezing arctic temperatures are more likely to move into the mid-latitudes, which increases the risk of unusually cold temperatures in areas that are generally unprepared for these conditions.

KCC also confirmed that Version 3.0 incorporates a refined approach for calculating the impact of terrain on winter storms.The upgrade also introduces new secondary building characteristics for each sub-peril to capture the unique impacts of wind, snow/ice, and freezing temperatures on different building features and mitigation measures.While annual expected losses from winter storms have not increased significantly, KCC reports that the probabilities of $20 billion and larger losses have increased.

Karen Clark, KCC Co-Founder and CEO, commented: “The winter storm peril—while not a solvency threat for major insurers—can produce large losses, as was demonstrated in February of 2021.A $30 billion winter storm event would not be a surprise today.” No doubt, this new upgrade will be extremely useful to the insurance, reinsurance and insurance-linked securities (ILS) industry, as it will provide market participants with more accurate estimates of freeze, snow, and ice-related losses, reducing uncertainty and unexpected volatility.with the firm indicating that the update is expected to provide the accuracy and stability required by reinsurers and ILS investors for capital allocation concerning the severe thunderstorm peril..

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.