Cat Models Did Not Account For Japan Earthquake-Tsunami Combo

The Japan earthquake and tsunami revealed a flaw in catastrophe modelers' planning, as modelers pointed to the fact that they did not account for the complete devastation that hit the island nation.

In its report earlier this week that estimated between $15 billion and $35 billion in property losses from the quake, Boston-based AIR Worldwide said it does not include such events as took place in Japan last week in its models.

"…the AIR Earthquake Model for Japan does not account for the effects of tsunami," AIR said. "As more detailed information becomes available, AIR plans to independently estimate the loss due to tsunami and provide a combined loss estimate that avoids double-counting in the affected areas."

Robert Muir-Wood, chief research officer for risk-modeler Risk Management Solutions, told NU that for some models tsunamis are a "deterministic footprint," but are not generally a part of catastrophe modeling.

The earthquake and tsunami in Japan will "very likely" make tsunamis a fundamental part of catastrophe modeling in the future, he said.

There are two reasons why tsunamis, especially in Japan, were not a part of catastrophe models, Mr. Muir-Wood said. First, the government has spent a lot of money on sea walls that were thought to protect the populace from such an event. But the recent wave "came clear over the top."

Second, the area of concern was with Tokyo bay, where it was thought a tsunami would not be a significant problem.

"People believed that this was not such a big risk," he said.

For modeling purposes, tsunamis would only be a concern if they were an extreme loss event, noted Mr. Muir-Wood, and this particular event was not only extreme, but very rare. The last such tsunami of this magnitude in Japan was recorded 1,100 years ago.