RMS Debuts the Cat-in-a-Box Cloud-based App for Parametric Contracts

The app provides consistent, and transparent methodology to model the parametric transactions popular with the insurance-linked securities (ILS) community.

(Image source: RMS.)

RMS (Newark, Calif.) has released its new RMS Cat-in-a-Box app., which the catastrophe modeling risk management firm describes as cloud-based app that extends the ability to independently assess and underwrite parametric contracts from a small group of cedant, brokers, and underwriters to all (re)insurers or insurance-linked securities (ILS) funds.

Cat-in-a-Box deals—so called because they provide cover for a particular type of catastrophe in a given geographical “box”—have long been a solution for corporates looking for quick and effective protection, particularly for offshore energy platforms. RMS characterizes Cat-in-a-box as a simple, consistent, and transparent methodology to model these transactions hitherto unavailable to the ILS community.

“The new RMS Cat-in-a Box app makes modeling parametric risk dramatically more straightforward, opening up the opportunity for many more companies to transfer risk on this basis,” comments Stephen Moss, director, capital markets, RMS. “Not only can users easily define the geographic areas in question, calculating the likelihood of different sized catastrophes is made simple, including the key peril-regions such as hurricane risk in the Gulf of Mexico and North America earthquake.”

Parametric deals are “claim-less” contracts in that the insured party is indemnified not by reporting a loss but merely through the triggering of a set of contractual parameters. In the case of catastrophe, the trigger may be the a maximum wind speed or storm category rather than any losses that might result from it. This approach enables quick decisions to be made on whether a contract is triggered, resulting in a quick payment when it’s most needed, and no need to endure a lengthy claims process.

Meeting Increasing Supply of Parametric Deals

“With the numerous benefits provided by parametric structures combined with the ability to now better assess the risk using the new RMS Cat-in-a Box app, we fully expect the supply of parametric deals to increase as we approach the start of the 2016 hurricane season,” Moss ads.

RMS reports that its Cat-in-a Box app, which operates on the RMS Miu Insights web platform, uses a simple graphical user interface. Users can adjust the geographic area and change hazard parameters to produce instant key risk metrics and Exceedance Probability (EP) curves.

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at AnthODonnell@IIReporter.com or (503) 936-2803.

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