RMS unveils cyber accumulation tool - FREE

RMS has unveiled the first of its new cyber risk products and launched a management tool to help clients get a better understanding on their exposure to this rapidly growing and fast developing threat.

The risk modeller has been working closely with the Cambridge Centre of Risk Studies, as well as a host of re/insurance industry firms, to develop the new cyber products. The new tool includes both a software system and framework for cyber exposure reporting as well as a suite of cyber catastrophe scenarios for loss modelling.

Called the RMS Cyber Accumulation Management System, the risk modeller said the new tool gives insurers the framework necessary to properly organise and structure their data. It also provides five cyber loss models that will allow insurers to stress test their portfolios against a range of cyber loss methods.

The release of the new product comes as more re/insurers make the move into the cyber market. Corporate risk managers view the peril as one of the biggest threats to their businesses, and while insurers are offering products, they are understandably taking a cautious view with what is a fast moving risk that constantly and repeatedly evolves.

As such, insurers have been offering limits that frequently do not match their clients’ needs, noted RMS.

“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,” said Andrew Coburn, senior vice president with RMS.

“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. Assessing the probable maximum loss (PML) for cyber is a key determinant for an insurer to set its risk appetite, enabling firms to understand the potential size of cyber catastrophes.

“Without an ability to set a PML, insurers are compelled to assume a conservative approach, limiting their capacity and reducing the efficiency of their capital management,” added Coburn.

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

RMS’ launch of the accumulation tool has been accompanied by a new report called Managing Cyber Insurance Accumulation Risk. Both the release of the Cyber Accumulation Management System and the report come after RMS published its Cyber Exposure Data Schema in January.

“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 (pictured), chief executive 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.”