The Future of Cyber Risk

What will cyber-risk look like in 2030? Given the rate of change of technology this may seem like an impossible question to answer. But for those making investments that depend on these new technologies and the risk that surround them – either managing or insuring the risk – it’s critical that these investments are being made not only with a 12 month horizon in mind, but with a projection that extends over the next five or even ten years.

To facilitate this important discussion, RMS is delighted to be co-hosting an event at the University of Cambridge Judge Business School on “The Future of Cyber Risk”. To be held on July 24, the event will challenge cyber risk specialists and risk managers to think beyond the next 12 months and to consider how cyber could evolve over a five- to ten-year horizon.

In particular, the event will focus on the potential paradigm shifts that could provide strategic shock, and how business strategies should be developed to cope with this uncertain future.

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Getting Ready to Dive In

RMS is proud to be a gold sponsor for this year’s Dive In – the festival for diversity and inclusion in the insurance industry. Dive In has gained such great traction around the globe as it gears up for its fifth year. It started as an initiative by Lloyd’s to raise awareness and celebrate diversity and inclusion in the insurance market – and has emerged as a global movement in the sector to support the development of inclusive workplace cultures, and much more. The work of Dive In is year-round, but its focal point is a three-day festival (September 24-26) with a wide range of different events happening in countries around the world, all of which aim to bring diversity and inclusion of all types to the fore.

Year-on-year, the Dive In festival has grown exponentially in terms of events, and the numbers of countries and attendees. From the first festival in London in 2015, last year saw 115 events in 27 countries, attracting over 9,000 attendees, and 72,000 visits to the Dive In website.

And with Dive In recognizing the challenges that the global risk industry faces, such as climate change and cybercrime, the industry knows it needs to be able to attract the very best talent to keep pace with the rate of change, and focus on its reputation as a great sector to work in.

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London Bridge Terrorism Inquests: A Counterfactual Risk Perspective

The inquests into the deaths of eight individuals killed in a terrorist attack on London Bridge and in Borough Market on June 3, 2017, were held at the Central Criminal Court, Old Bailey, London, two years later – from May 7 to June 28, 2019. Judge Mark Lucraft, the Chief Coroner for England and Wales, concluded that the eight victims were unlawfully killed, but he was not convinced that MI5 and the police missed any opportunities that would have prevented the attack.

Three Islamist terrorists, Khuram Butt, Rachid Redouane, and Youssef Zaghba, rammed pedestrians on London Bridge, before launching a frenzied knife rampage around nearby Borough Market, a lively food market and tourist hotspot that attracts 4.5 million visitors per year. The three attackers were shot dead by police at 10.17 p.m., less than 10 minutes after the rampage began.

Although the Chief Coroner did not criticize MI5 and the police in his conclusions, he did criticize the lack of security barriers on the bridge, and concluded that this showed weaknesses in systems for assessing the need for such measures, and implementing them promptly. The attack happened only two-and-a-half months after the Westminster Bridge vehicle ramming attack on March 22, 2017.

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RMS Location Intelligence API: Underwriting with 20/20 Vision

This is a taster of an article published in the latest edition of EXPOSURE magazine featuring the RMS Location Intelligence API. For the full article click here or visit the EXPOSURE website.

The insurance industry boasts some of the most sophisticated modeling capabilities in the world. And yet the average property underwriter does not have access to the kind of predictive tools that carriers use at a portfolio level to manage risk aggregation, streamline reinsurance buying and optimize capitalization.

Detailed probabilistic models are employed on large and complex corporate and industrial portfolios. But underwriters of high-volume business are usually left to rate risks with only a partial view of the risk characteristics at individual locations, and without the help of models and other tools.

Many insurers invest in modeling post-bind in order to understand risk aggregation in their portfolios, but Ross Franklin, senior director of data product management at RMS, suggests this is too late. “From an underwriting standpoint, that’s after the horse has bolted — that insight is needed upfront when you are deciding whether to write and at what price.”

By not seeing the full picture, he explains, underwriters are often making decisions with a completely different view of risk from the portfolio managers in their own company. “Right now, there is a disconnect in the analytics used when risks are being underwritten and those used downstream as these same risks move through to the portfolio.”

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An Award-Winning U.S. Inland Flood Model

It was off to London’s Savoy Hotel for members of the RMS London team last Thursday, for the Eleventh Trading Risk Awards. And apart from the great hospitality, and the flowing conversation from colleagues and industry peers alike, RMS was also recognized by the award judges, receiving the “Initiative of the Year” award for the RMS U.S. Inland Flood HD model.

Without sounding like an Oscar acceptance speech, on behalf of the team that worked on the model, I would like to thank the judging panel made up of representatives from the media and the industry for selecting our entry. Released last October, the flood model is designed to help the private insurance market seize the opportunities presented by this peril, and to also ultimately help accelerate flood insurance take up in the U.S.

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The Value of Flood Protection: Quantifying the Benefits of Defenses Along U.K. Rivers

Whenever the U.K. is hit by major flooding, attention quickly turns to the performance of the nation’s flood defenses. Some defenses, such as London’s Thames Barrier, are regularly recognized for their vital role in protecting people and property. The value of other mitigation measures, however, has been frequently challenged, such as when defenses failed to prevent significant flooding in Cumbria during storm Desmond in 2015.

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SiteIQ and the Art of Empowerment

This is a taster of an article published in the latest edition of EXPOSURE magazine featuring the new RMS application – SiteIQTM. For the full article click here or visit the EXPOSURE website.

EXPOSURE magazine recently looked at the challenges that underwriters and agents at coverholders currently face, to get comprehensive risk data when evaluating an individual location.

When evaluating single risks, underwriters and coverholders typically have to request exposure analytics from their portfolio managers and brokers, or gather their own supplementary risk data from a range of external resources, whether it is from Catastrophe Risk Evaluation and Standardizing Target Accumulations (CRESTA) zones, through to lookups on Google Maps. But all this takes valuable time, requires multiple user licenses and can generate information that is inconsistent with the underlying modeling data at the portfolio level.

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Ebola Epidemic: Confirmed Cases in Uganda

Situation

It has been reported that the current Ebola Virus Disease (EVD) epidemic, which has caused over 1,300 confirmed deaths in the Democratic Republic of the Congo (DRC) since its onset in August 2018, has now also caused at least one confirmed death in neighbouring Uganda.

The number of confirmed deaths has been steadily increasing since the onset of the outbreak, though since March there has been a notable increase in the reported number of deaths per week. A recent trend shows a slight decrease from the peak, with the current situation report recording 50 deaths among confirmed EVD cases in the past week (Figure 1 below).

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The Disappearing Tokyo Risk Audit

Without the ability to measure, how do we know if we are making progress?

In December 2012, in preparation for the renewal of the UN Millennium Development Goals, I wrote a report for the U.K. Government Department for International Development (DFID) advocating that catastrophe models should be used to measure progress in disaster risk reduction. I suggested goals could be set to target a 50 percent reduction in expected casualties and a 20 percent reduction in normalized economic losses, over the period of a decade, based on the output of a catastrophe model.

Two years later, the seven targets agreed at the UN meeting on Disaster Risk Reduction, held on March 14–18, 2015, in Sendai, Japan – were a disappointment. The first two targets for “Disaster Mortality” and “Affected People” would simply compare data from 2020-2030 with 2005-2015. The third target was to “reduce direct disaster economic loss in relation to global GDP by 2030”. Yet we know, especially for casualties – even at a global level, a decade is not enough to define a stable mean. For cities and countries, comparing two decades of data will generate spurious conclusions.

And so, it was a relief to see that only two weeks later, the Japanese and Tokyo city governments announced they had set themselves the challenge of halving earthquake casualties over a decade, measured by modeling a hypothetical event based on the M7 1855 Edo earthquake under Tokyo. I referenced this announcement and quoted it widely in presentations, to highlight that risk modeling had been embraced by the country with the most advanced policies for disaster risk reduction.

Over the last two years, I started searching for some update on this initiative. What kind of progress in risk reduction was being achieved, whether the targets for Tokyo would be met? And I found my original links had all stopped connecting. Perhaps in my enthusiasm I had dreamt it?

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May Tornadoes Leave U.S. in a Whirlwind

Late May 2019 was a startlingly active period for severe convective storms (SCS) in the U.S., even after considering that May is typically one of the most active months of the year. Until about halfway through the month, the number of tornadoes being reported was around average, but after a major outbreak starting in mid-May this number shot up, bringing the year-to-date total to 1,017 tornado reports. This count is only surpassed by the extremely active years of 2008 and 2011 (Figure 1).

This year’s late May outbreak was also unusually long: by the end of Wednesday, May 29, at least eight tornadoes had been experienced each day across a record-breaking 13 consecutive days, according to preliminary data from the National Weather Service (NWS). The previous record was set in 1980, after 11 consecutive days with at least eight tornadoes.

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