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In-depth analysis of the RMS Terrorism Model

Improved understanding​ of business interruption

Enhanced insights to help clients improve outcomes

Challenge – Understanding Business Interruption Losses After a Terrorism Event

The catastrophe analytics team at a major intermediary was keen on better understanding how business interruption was captured by the RMS® Terrorism Model, and in particular if it encompassed added elements such as removal of debris and additional living expenses. Based on a range of scenarios (both conventional and chemical, biological, radiological, and nuclear attacks), the broker wanted to clarify – with a high level of detail and certainty – what business interruption losses could arise and how they would be captured.

Solution – Tapping Into 24/7 Knowledge

The broker worked closely with the RMS Knowledge Center and its skilled team of subject matter experts, terrorism analysts, product managers, model developers, and other specialists. RMS was able to explain which elements of business interruption are captured by the terrorism model and what underlying assumptions are made. 

We also covered how RMS conducts vulnerability assessments and reconnaissance work, to understand the true nature of different attacks, and how business interruption losses could arise, both for the initial target and neighboring properties (for commercial and residential). The team explained how additional elements of prolonged business interruption, caused by evacuation and the introduction of exclusion zones, are factored in.  

Outcome – Better Understanding = Better Advice

Clients often demand a greater level of transparency for emerging, man-made catastrophes, such as cyber or terrorism, because risk is much more dynamic. This broker considered trust, transparency, and customer service critical to building sustainable relationships with its clients.

The broking team partnered with the RMS Knowledge Center to better communicate the drivers of terrorism risk. Together, they interpreted the Probabilistic Terrorism Model and took a closer look into what drives losses in terrorism events. RMS served as a trusted guide, answering any question the broking team had about the model. Armed with these insights, the broker’s catastrophe analytics team was better equipped to advise clients on modeling results and model suitability, empowering them to make more informed, data-driven decisions on risk transfer and pricing.

Key Results
  • In-depth analysis of the RMS Probabilistic Terrorism Model and its treatment of business interruption
  • Detailed understanding of how added sources of business interruption are captured, including debris removal and additional living expenses
  • Enhanced insights to help clients improve outcomes, strengthen risk transfer and pricing decisions, and create well-structured (re)insurance programs
  • Increased ability to more effectively advise clients on model suitability
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