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I’ve just returned from the Clinton Global Initiative (CGI) annual meeting in New York. Every September, political, corporate, and non-profit leaders from around the world gather to discuss pressing challenges, form partnerships, and make commitments to action. It was inspiring to see the tremendous work already being done and the new commitments being made to address a diverse and wide range of issues, from containing the Ebola epidemic, to increasing access to education, to combatting climate change, and helping Haiti develop a self-sustaining economy.

One prevailing theme at the event this year was the importance of cross-sector partnerships to successfully tackle such complex issues. Not surprisingly, data crunched by the CGI team on commitments made over the past 10 years demonstrates the highest rate of success from partnerships vs. go-it-alone approaches.

In this spirit, we announced an RMS commitment last week to partner with the Rockefeller Foundation’s 100 Resilient Cities initiative to help increase the resilience of cities around the world. We will be making our RMS(one) platform and our catastrophe models available to cities in the 100RC network so that they can better understand their exposures, assess risk to catastrophic events as well as climate change, and prioritize investments in mitigating and managing that risk.

As the saying goes, “if you can measure it, you can manage it.” From our 25 years of experience helping the insurance industry better measure and then manage catastrophe risk, we believe there is a largely untapped opportunity for the public sector to similarly leverage exposure management and catastrophe modeling technology to establish more informed policies for managing risk and increasing resilience in cities throughout the world, both in developed and emerging economies.

It was also clear this week that the conversation in corporate boardrooms is increasingly moving from being focused solely on the financial bottom line to also having a positive impact on the world in a way that is strategically aligned with the core mission of the business.

Our partnership with 100RC, along with the partnerships with the UNISDR and the World Bank that we announced this summer, is another step in our own version of this journey. Through both our direct philanthropic support of Build Change and their admirable work to improve construction practices in developing countries and through the leveraging of our technology and the expertise of our colleagues to help the public sector, we are aligning all of our activities in support of our core mission to increase the resilience of our society.

Many of our clients have shared with us that they are on similar journeys, building on traditional support for local organizations to implement more strategic programs with broader impact and employee engagement. In particular, the insurance industry is uniquely positioned to understand the value of proactively investing in mitigation and in increasing resilience, instead of waiting until a tragedy has occurred and all that can be done is to support humanitarian response efforts.

With this common frame of reference, we look forward to increasingly partnering with our clients in the coming years not just to help them manage their own risk but to collectively help increase resilience around the world.

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Building A Modeling Ecosystem

Many of our clients these days are multi-model shops; that is, they use a mosaic of catastrophe models from multiple providers to formulate their view of risk across the different territories in which they operate. For some, this approach enables them to acquire a more complete modeling capability than they could from any one provider. For others, it is a path to exploring uncertainty through multiple perspectives for the same region and peril, sometimes even including blending of results. While we observe increasing conviction in the market about the importance of being able to access models from multiple providers, we see among our clients an equally strong conviction that they want one – and only one – analytical platform on which to consistently manage their global portfolio. Many want multiple models, but no one wants multiple platforms. When we architected RMS(one), one of our fundamental design principles was that it had to be both multi-model and model agnostic. To fully deliver on the promise of an enterprise-grade exposure and risk management system, it would have to enable insurers, reinsurers and brokers to run their businesses using whatever combination of proprietary and commercial catastrophe models they chose to use. Achieving the Promise of a Platform Today’s desire for access to multiple models is often derailed by the ugly reality of what it takes to actually implement a multi-model strategy. Each model from a new provider requires separate software, and a proliferation of cat modeling software brings an array of costs that far exceed the licensing costs for the models alone: new servers, IT staff to install and maintain systems, user training, new processes, data translation tools and so forth. We regularly hear from clients that they have declined to license models that would be of value to them because of the costs and operational hassles. And we regularly meet would-be modelers who have no effective way to deliver their models to the insurance industry. By opening RMS(one) and operating it as a true platform, we enable modelers with established models to deliver them to the global insurance community with the flick of a switch. We enable aspirational modelers with credible engineering and science to implement and make their models available without having to build or even understand insurance financial models, data schemas for complex insurance and reinsurance contracts, or high performance distributed compute architectures. And we enable insurers, reinsurers and brokers to access a rich ecosystem of models with zero frictional costs. From Competitors to Partners This journey has challenged us to view our traditional competitors differently. While we will still compete vigorously as modelers, we have found common cause: to deliver a better and more compelling solution to the insurance industry in a way that can be a win for everybody, in particular for our mutual clients. We have collectively achieved a shared understanding of the importance of what is sometimes called “co-opetition” in the modern technology landscape. To date, we have announced four partners who are implementing their models on RMS(one). The first of these models have now been successfully implemented, proving the versatility of the platform architecture to support models of numerous flavors and underlying technical designs. Partner modelers will also be able to take full advantage of all of the open modeling capabilities of RMS(one), enabling model users to implement proprietary adjustments to the models so that they can operationalize their own view of risk. We expect to make the first models from Risk Frontiers and ERN available with the release of RMS(one). In fact, the Risk Frontiers Tropical Cyclone model will be available to clients experiencing our final beta release of RMS(one) in coming weeks. It will be the first time in the history of our industry that models from multiple providers can be operated seamlessly on a single platform. JBA’s flood models will follow. And this week we were pleased to welcome Applied Research Associates as our latest partner. Collectively, these partners are implementing more than 40 probabilistic catastrophe models on RMS(one). Some of these will broaden the range of models available to users beyond the boundaries of the current RMS global model suite, bringing new capabilities for perils as diverse as Australia flood, Mexico hurricane and Thailand flood. Others will provide clients with alternative views of risk for perils ranging from U.S. hurricane to Colombia earthquake. A Growing Ecosystem With RMS(one), it is easier than it has ever been to build and deliver new models to the insurance industry. The ecosystem of models on the platform will continue expanding over time, and we expect it to include a growing number of models from new modeling organizations formed to take advantage of the opportunity presented by an open platform. Insurers and reinsurers will be the ultimate beneficiaries of this increasingly rich ecosystem of models. And as with other major advances in catastrophe modeling in the past, the new capabilities and choices available to them will raise new questions about how to evolve the state of practice, sparking further innovation and collaborative developments to insure catastrophe risk around the world.…

Paul VanderMarck
Paul VanderMarck
Head of Global Strategy and Partner Development , RMS

Paul is responsible for corporate strategy and business development at RMS. Since joining RMS in 1992, Paul has played a key role in developing the company’s global catastrophe modeling product suite and advancing the state of practice for catastrophe risk management. In 2003, the Earthquake Engineering Research Institute recognized Paul for his contributions to the field of earthquake risk mitigation and management with the Shah Family Innovation Award. Paul also serves as Chairman of the Board of Build Change, a non-profit social enterprise focused on improving construction practices in developing countries. He holds a bachelor’s degree in civil engineering and a master’s in structural engineering from Stanford University.

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