RMS Releases Cyber Accumulation Management System to Manage Exposure

February 3, 2016

RMS has released its Cyber Accumulation Management System*, which includes a new software system and framework for cyber exposure reporting, in addition to a suite of cyber catastrophe scenarios for loss modeling.

The RMS Cyber Accumulation Management System was developed with a consortium of cyber insurers in collaboration with the Cambridge Centre of Risk Studies, said a statement released by Newark, Calif.-based RMS, the catastrophe modeling and software company.

“While many insurers see cyber as a growth opportunity they are cautious of scaling their limits and increasing their exposure because, rightly, they’re concerned about accumulation – what happens if many of their insureds are impacted in a large-scale ‘cyber catastrophe’? To prudently increase capacity for cyber insurance, insurers need to first understand both their cyber accumulation and correlations,” said Andrew Coburn, senior vice president, RMS.

Assessing the probable maximum loss (PML) for cyber is a key determinant for insurers to determine their risk appetite and understand the potential size of cyber catastrophes, said RMS, noting that as insurers are currently unable to set PMLs for cyber, they are forced to assume “a conservative view of the risk.”

This limits their capacity and reduces their capital management efficiency, which is why the RMS Cyber Accumulation Management System was developed, the company added.

It is designed to provide insurers with the framework to organize and structure their data, in addition to five cyber loss models, which enables insurers to stress test their portfolios against a range of cyber loss methods.

“Our economy is undergoing a profound digital transformation and cyber-related insurance has the potential to be a fundamental driver of growth for the global re/insurance industry,” said Hemant Shah, CEO and co-founder of RMS.

“The global insurance industry has always played a crucial role in ensuring the resiliency of our economy, and the launch of the RMS Cyber Accumulation Management System is not only an important first step in furnishing our clients with the models and tools to safely grow capacity for this line of business, it also helps to create a fundamental opportunity for the industry to increase its relevance in a rapidly changing economy,” Shah added.

Simon Ruffle, director of technology research and innovation at the Cambridge Centre for Risk Studies, cited a report published in conjunction with RMS, which pinpoints a number “of new and important concepts for quantifying accumulation risk.” (The report is titled “Managing Cyber Insurance Accumulation Risk,” which sets out a framework for managing accumulation risk).

“Our research has identified the insurance coverage categories that are most susceptible to systemic cyber events, and revealed these categories are not only present in affirmative cyber insurance products but extend to silent exposures in ‘all risks’ policies covering property and casualty without explicit cyber exclusions,” Ruffle said.

The launch of the RMS Cyber Accumulation Management System follows the company’s publication in January of its Cyber Exposure Data Schema, which developed the data requirements for the Cyber Accumulation Management System.

* The Cyber Accumulation Management System, which was developed by RMS in collaboration with the Centre of Risk Studies at Cambridge University, was supported by Amlin Plc, Aon Benfield, AXIS Capital, Barbican Insurance Group, Canopius Managing Agents Ltd. and SJNK Inc., RenaissanceRe Holdings, Talbot Underwriting, and XL Catlin.

Source: RMS


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