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Catastrophe modeling firm RMS (Newark, Calif.) 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 what the vendor characterizes as a consortium of forward-thinking cyber insurers, and in collaboration with the Cambridge Centre of Risk Studies. RMS has published an accompanying report, titled Managing Cyber Insurance Accumulation Risk, setting out a comprehensive framework for managing accumulation risk.
“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’?” comments Andrew Coburn, senior VP, RMS. “To prudently increase capacity for cyber insurance, insurers need to first understand both their cyber accumulation and correlations.”
RMS asserts that assessing the Probable Maximum Loss (PML) for cyber is a key determinant for insurers to set their risk appetite and understand the potential size of cyber catastrophes. However, the vendor stresses, insurers are currently unable to set PMLs for cyber, compelling them to assume a conservative view of the risk, which limits their capacity and reduces their capital management efficiency. To address this, the RMS Cyber Accumulation Management System is designed to provide insurers with the framework to organize and structure their data, in addition to five cyber loss models that enables insurers to stress test their portfolios against a range of cyber loss methods.
Profound Digital Transformation
“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,” comments 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.”
“Accumulation is very much a function of the cyber insurance coverages provided by firms,” notes Simon Ruffle, director of technology research and innovation at the Cambridge Centre for Risk Studies. “In our joint report with RMS, Managing Cyber Insurance Accumulation Risk, we pinpoint a number of new and important concepts for quantifying accumulation risk to help firms reveal the loss potential in a portfolio. 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.”
The launch of the RMS Cyber Accumulation Management System follows RMS’s publication in January of its Cyber Exposure Data Schema, which sets out the data requirements for the Cyber Accumulation Management System.
The Cyber Accumulation Management System was developed by RMS in collaboration with the Centre of Risk Studies at Cambridge University. The initiative 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.