RMS Releases Probabilistic Cyber Risk Model with Cyber Solutions v3.0

The model provides losses at different return periods for all major cyber loss processes, so insurers can allocate risk capital and design products reflecting the full nature of cyber risk.

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RMS, a Newark, Calif.-based risk modeling and analytics firm, has released a new version of its cyber risk management platform, renaming the solution formerly known as RMS Cyber Accumulation Management System to mark the magnitude of expanded functionality. The firm characterizes the new release, RMS Cyber Solutions 3.0, as including the insurance industry’s first probabilistic model for cyber loss, providing losses at different return periods for all five of the major cyber loss processes, enabling insurers to allocate risk capital and to design products and risk solutions that reflect the full nature of cyber risk.

Adam Sandler, Head of Underwriting, Cyber and Model Solutions, RMS.

“RMS clients are seeing demand for cyber insurance growing rapidly and their ability to pursue this opportunity is constrained by their ability to allocate risk capital with confidence,” comments Adam Sandler, Head of Underwriting, Cyber and Model Solutions. “Cyber is still relatively unknown and doesn’t behave like other perils. Our clients’ highest priority request to RMS over the past couple of years has been for cyber loss probabilities, particularly for our accumulation scenarios, to assess the cost of capital needed to support this growth opportunity. With this release, we are answering that need. Our new solution offers a platform for integrating models, data, and analytics, to provide a comprehensive and responsive way forward for cyber insurers.”

The new release also adds functionality to apply to reinsurance of cyber losses, providing financial perspectives to all reinsurance stakeholders. Additionally, it provides tools to allow model users to incorporate their own loss experience into the model and develop their own view of risk.

RMS reports that Cyber Solutions 3.0 extends the functionality for insurers to analyze their “silent” cyber exposure in other classes of insurance, such as property damage, energy, and marine, by relating policy terms and conditions and linking to portfolios of property exposure data in the RMS EDM, the data standard used by most of the insurance industry.

New Analytics for Selecting and Pricing Individual Accounts

RMS Cyber Solutions 3.0 also incorporates new analytics for selecting and pricing individual accounts, and for quantifying loss probabilities for cyber risk rating factors, according to the vendor. RMS has undertaken new partnerships with security ratings providers BitSight and SecurityScorecard to improve the predictive power of rating individual companies. RMS says it has been working with both providers to calibrate its cyber loss experience data with telematics information that provides insight into the vulnerabilities and risk factors of a company’s security posture and attack surface.

“Statistical experience data only provides a few years of benchmarking, and the patterns of loss continue to shift,” remarks Christos Mitas, VP, Model Development, RMS. “Our models show that loss processes such as contagious malware have the capability to scale and trigger large losses much more easily than others, such as data exfiltration, where attackers target individual companies to steal their sensitive data, or cloud outage, which is currently limited by the customer base of cloud service providers.”

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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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