An Alternative Analysis of the Risk Posed by Typhoons and its Application in the Context of Parametric Insurance

Tropical cyclones (TCs) have tremendous impact on East Asia, including China. On average, 6 to 7 TCs with intensity of at least tropical storm make landfall in China every year. For the 2018 season, the China Meteorological Administration (CMA) reported TC-related direct economic losses was of over 67 billion RMB and approximately 32 million people have been affected. Financial instruments for risk transfer such as (re-)insurance solutions are an option to mitigate the most severe post-disaster impacts due to their high benefit-cost ratio. In particular, parametric insurance can be suitable for related DRR applications.
However, there are some challenges in designing reliable parametric insurances. Due to a limited nature of meteorological observations for high impact Typhoons, the current assessment of the real hazard frequency and intensity is largely uncertain. In addition, an analysis of the compound hazard – extreme wind and extreme precipitation, of Typhoons is necessary due to the enormous potential impact of TCs to the economic development and societal welfare of coastal regions. This presentation reflects on the latest findings of a collaboration between academia and practitioners to increase the robustness of trigger points of parametric insurance. A new method to construct a large physically consistent TC event set (roughly 10,000 years of events) based on numerical weather prediction models is presented (Ng & Leckebusch, 2021) and a systematic method for the detailed analysis of the compound nature of the tropical cyclone hazard with respect to damage relevant impacts is suggested. In this presentation, we propose also an application of the new physically consistent event set in the context of a parametric insurance for specific cities in Guangdong Province.