Cat In A Box app from RMS aimed at corporates

The RMS Cat In A Box app, which simplifies the process of assessing and underwriting parametric risk, will extend the universe of insurers, reinsurers and investors that want to participate in the parametric ILS space, RMS believes. Parametric deals are attractive to capital markets investors because the terms of the contract are independently dictated by the location and parameters of the catastrophe - maximum wind speed or the storm category for example - rather than the insured losses incurred by the event. They are also attractive to buyers of protection as they provide quick decisions on whether a contract is triggered, resulting in fast payment when it's most needed without a drawn out claims process.hideCat-in-a-Box deals are so called because they provide cover for a particular type of catastrophe in a given geographical "box". The energy sector - especially businesses with offshore platforms in the Gulf of Mexico's hurricane alley - find such deals effective because of the complex nature of loss development and business interruption associated with nat cats. Stephen Moss, director of capital markets at RMS, believes that the RMS Cat-in-a Box app makes modelling parametric risk dramatically more straightforward, and will open up parametric risk transfer "technology" to more companies. "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," Mr Moss said. The RMS app's graphical interface allows users to tailor the required geographic area and change hazard parameters to produce relevant risk metrics and Exceedance Probability (EP) curves. "The app provides a level playing field and common language for everyone involved in structuring a transaction, without the need for a huge amount of technical personnel and 'analytical horsepower'," Mr Moss told CRE. The first version of the app will cover Gulf of Mexico windstorm and California earthquake, where conventional insurance policy deductibles can be high. Mr Moss said the methodology used for the app can be applied to many geographic regions, however, and that coverage could eventually be extended to east coast Atlantic hurricane risks, for example, as well as Japan earthquake and windstorm. Ultimately, the RMS Cat-In-A-Box app could even help corporates in different locations with their supply chain or contingent business interruption risks, Mr Moss believes. "The data burden to do with analysing CBI for risk transfer through insurance can be incredibly high. But the app could be an elegant and simple way of bypassing that burden," Mr Moss said. "Instead of protecting against the 'dollar for dollar' losses that might be incurred by a nat cat hitting their supply chain, some businesses would benefit from a capital injection immediately after an event to help mitigate the financial effect of the interruption - say the cost of sourcing from other suppliers. "In the long run we believe that parametric protection is going to be a bigger part of the corporate insurance domain," Mr Moss said.

Cat In A Box app from RMS aimed at corporates

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