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Forecasts of Tropical Cyclone Activity to Benefit
        Business, Industry and Society

                    May 2003
              The TSR Venture
   Founded in 2000, Tropical Storm Risk (TSR) offers the
    best available resource for forecasting the risk from
    tropical storms worldwide.

   The venture provides innovative forecast products to
    increase risk awareness and to help decision making
    within the (re)insurance industry, other business
    sectors, government and society.

   The TSR consortium comprises experts on insurance,
    risk management and seasonal climate forecasting.
        Leadership and Independence
   The TSR Storm Tracker provides the best available
    information for assessing the risk from active tropical
    storms worldwide.

   The TSR monthly-updated forecasts for seasonal
    tropical cyclone activity in the Atlantic, NW Pacific
    and Australian-region basins provide the best
    outlooks for assessing the likelihood of upcoming
    damage and disruption.

   TSR offers independence and transparency in
    forecast skill and significance.

   TSR has an impressive forecast track record.
                  Storm Tracker Demonstration
   The TSR Storm Tracker
    provides real-time forecasts
    out to 5 days lead for all
    active tropical cyclone
    systems worldwide.

   Forecasts are updated every
    6-12 hours and provide the
    best available information
    on storm strength, track
    and, track uncertainty all
    with various levels of zoom.

   A unique feature is our
    forecast 2-dimensional
    windfields (in knots) for all
    systems of at least
    hurricane force prior to
    extra-tropical transition.
                   Atlantic Basin Regional Map
   Clarity of information,
    ease of use and
    relevant content
    information for
    (re)insurers and risk

   Storm centred zooms
    for current and
    forecast positions out
    to 120 hours lead.

   Forecast track
    uncertainties out to
    120 hours lead.

   Current and forecast
    windfields out to 120
    hours lead.
Lili - Forecast Track and Error
21 Hours Lead     69 Hours Lead
  Lili - Forecast Windfields
21 Hours Lead     69 Hours Lead
       Isidore - Forecast Products
              23rd September 2002, 12:00 GMT
Forecast Track and Error         Forecast Windfield
 Out to 69 Hours Lead              69 Hours Lead
               Historical Storms
   Super Typhoon Bilis        Cyclone 05B, Orissa
Taiwan, 22nd August, 2000   India, 29th October 1999
               TSR Seasonal Forecasts


         Recent Forecast Performance
•   North Atlantic 2002: “The TSR forecasts were
    certainly the first to correctly anticipate a below
    normal Atlantic hurricane season in 2002”
    (Chris Landsea, co-author of the Gray and NOAA
    seasonal Atlantic hurricane outlooks).
•   NW Pacific 2002: TSR accurately predicted that
    accumulated cyclone energy would be 20-30% above
•   Australian Region 2002/3: TSR accurately predicted
    that tropical storm and severe tropical cyclone
    numbers would be 1.0 standard deviation below
             ACE Index and Skill Score
Accumulated Cyclone Energy (ACE) Index
   TSR forecasts the NOAA Accumulated Cyclone Energy
    (ACE) Index which is the sum of the squares of maximum
    1-min sustained winds every 6 hours for all systems while
    they are at least tropical storm strength. The ACE Index is a
    better measure of overall activity and likely damage than
    the number of tropical storms or hurricanes alone.

Skill Score and Uncertainty
   TSR uses the percentage improvement in mean square
    error (MSE) over a running prior 10-year climatological
              MSEClim (%) = (1 - MSEFore/MSEClim) x 100
   TSR computes the 95% confidence interval on skill using
    the standard bootstrap method with replacement.
TSR Hindcast Skill for Atlantic
    Seasonal ACE Index

     Conclusion: Skill to 95% Confidence
                 Exists from Early May
 TSR Hindcast Skill for NW
Pacific Seasonal ACE Index

   Conclusion: Skill to 95% Confidence
               Exists from Early May
TSR Hindcast Skill for Seasonal
  Hurricane Strikes on the LA

   Conclusion: Skill to 95% Confidence
               Exists from Early June
              TSR/Gray Skill Comparison
                                         PVE        RMSECL (%)   MAE CL (%)
Strength Lead Start Year End Year
                                    TSR    Gray     TSR   Gray   TSR   Gray
    H     0     1987      2001      67         45   43     25    43     22

    H     2     1987      2001      44         22    21    13    17     14

    H     4     1995      2001      30         0    20     10    19     12

    H     8     1992      2001      23         0    17     0     15     0

•   TSR outperforms Gray at all forecast leads and
    using all skill measures.
•   However, one can not conclude the TSR model is
    better than the Gray model since the latter has
    changed with time.
              Business Application
•   The TSR correlation skill for predicting the US ACE
    Index in true independent hindcast mode for the 30-
    year period 1973-2002 is 0.48.

•   In collaboration with the Helvetia Patria Group we are
    developing a method to simulate 10,000 years of US
    hurricane landfalls, losses and ACE index forecasts to
    examine the business relevance of the forecasted US
    ACE skills for reinsurance/retrocession buy and sell

•   Results show that a Forecast Strategy - which uses
    the TSR ACE Index forecasts to decide whether to buy
    - outperforms traditional buying strategies by about
    10% in terms of protection purchase efficiency.
•   TSR offers the best available resource for forecasting
    the risk from tropical storms worldwide.
•   The TSR Tropical Storm Tracker is the best tracker
    currently on the market and will become an industry
•   TSR has an impressive seasonal forecast track record
    and its predictions constantly outperform those from
    other parties.
•   TSR’s innovative forecast products provide increased
    risk awareness and, for the first time, the opportunity
    to improve reinsurance efficiency assessment.

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