The insurance linked securities (ILS) market could benefit from research being conducted by Atmospheric and Environmental Research (AER). Emerging Risk.The Bermuda Stock Exchange has 50 percent, or $7 billion, of the global ILS market listed. The market is currently seeing significant growth.AER announced last week that its scientists have begun a new emerging risk research programme entitled Climate Change: Tornado and Hail, to quantify any shifts in the patterns of hazard related to severe thunderstorms in North America.A release stated that it is the second project in the Emerging Risk research programme managed by AER for the insurance industry. AER’s scientists develop data through original research that is conducted in-house. The statement added it leverages its ‘extensive data warehouses and broad range of scientific experts.’The first research initiative, which was summarised in a report published by Lloyd’s of London and co-authored by AER scientists, according to the release, assessed the risk of covered loss due to widespread, long-duration power outages, and resulted in a catalogue of space weather blackout scenarios for the United States.AER stated that they are conducting an extensive historical analysis of thunderstorm wind, hail, and tornadoes to determine whether those perils are exhibiting a different frequency or severity than in the past. They are also assessing whether there is evidence of local influences on storm occurrence within different parts of a city.The AER Emerging Risk research study will focus primarily on tornadoes and hailstorms, which are of high interest to commercial lines and personal lines insurers in both the US and Canada.John Seo, managing principal of Fermat Capital Management was quoted in the AER release as saying: “Our particular motivation for participating in AER’s Emerging Risk research programme is to enable us to identify new risk transfer opportunities and expand the insurance-linked securities market beyond conventional risks in a responsible way.”He added: “Despite the considerable efforts and resources applied by the insurance industry toward fundamental research into emerging risks, there has been and will always be significant gaps between the scientific community and the insurance industry. AER has the technical expertise, the industry knowledge and, just as important, the operating model to close such gaps.”“AER’s research into the question of whether a changing climate is influencing severe thunderstorm risk is a welcome endeavour,” said Jayanta Guin, PhD, senior vice president at catastrophe modelling firm AIR Worldwide, a Verisk Analytics company. “I’m confident that the program’s findings will inform future generations of our US and Canada severe thunderstorm models.”“Through Verisk’s work with the North American insurance market, we have observed weather claim activity from a unique position, which has inspired us to dive into the related science at a rigorous level,” said Mark Anquillare, executive vice president and chief financial officer at Verisk Analytics. “The data and resulting insights gained from this research will shape the way product managers and actuaries measure and manage the risk from these hazards.”