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TROPICAL STORM RISK Forecasts of Tropical Cyclone Activity to Benefit Business, Industry and Society www.tropicalstormrisk.com 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 managers. 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 Forecast Regions Forecast Availability 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 average. • Australian Region 2002/3: TSR accurately predicted that tropical storm and severe tropical cyclone numbers would be 1.0 standard deviation below normal. 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 forecast: 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 strategies. • 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. Summary • 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 standard. • 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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