RMS Terrorism Risk Management Tools Aiding Insurers in Responding to New Best Questionnaire

January 23, 2004

Risk Management Solutions (RMS), a provider of products and services for the management of catastrophe risk, affirmed that its products can assist insurers in responding to the newly issued Supplemental Rating Questionnaire (SRQ) for terrorism risk issued by rating agency A.M. Best Company.

In the SRQ, A.M. Best Company requests that insurers indicate whether they utilize a terrorism model to quantify their risks; report their accumulation within key ‘target locations’; report their largest levels of accumulation in any single four-wall structure; and model their losses for a variety of terrorism attack scenarios.

Functionality delivered through RMS’ RiskLink product allows companies to perform a wide range of terrorism risk analyses, including those required in the AM Best questionnaire:

*Identify “at risk” locations using the RMS target list. This prioritized terrorism target list was developed by RMS in conjunction with global experts on international terrorism;
*Identify and quantify multi-line exposure accumulations within specific buildings, using ultra high-resolution data for major urban areas developed in conjunction with The Sanborn Map Company;
*Automatically locate a company’s top five multi-line exposure accumulations using a proprietary search algorithm (RMS’ Spider technology);
*Automatically locate a company’s top five multi-line terrorism loss scenarios using RMS’ Spider technology; losses can be computed using any of 32 different terrorist attack modes;
*Calculate exposure accumulations and loss estimates for a full range of financial perspectives, such as gross loss, net loss after reinsurance, and net loss after TRIA recoveries.

“We are encouraged to see A.M. Best recognize the importance of terrorism risk management within an insurer’s comprehensive catastrophe management program,” commented Hemant Shah, CEO of RMS. “The four-wall accumulation specificity of the SRQ reflects the highly site-specific nature of the risk, and the request for scenario losses appropriately recognizes the industry’s growing confidence with modeled output. The SRQ also recognizes and highlights the fact that property and workers’ comp losses can be highly correlated in a terrorism event and thus must be managed accordingly.”

RMS released version 2 of its U.S. Probabilistic Terrorism Model and its Scenario Terrorism Model in 2003. The models were developed in consultation with leading global experts on the terrorist threat, weapons systems, and security, and uses game theory as a framework.

The model includes a prioritized list of potential terrorist target locations as well as a spectrum of possible terrorism attack scenarios ranging from conventional weapons to weapons of mass destruction. Individual scenario losses are derived from sophisticated computational fluid dynamics and dispersal models to quantify the distribution of damages to property, time element, and human exposures.

For more information on accessing RMS technology for use in completing the A.M. Best SRQ, contact RMS at info@rms.com.

Topics Carriers Catastrophe Natural Disasters Profit Loss AM Best Risk Management

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