RMS launches new ‘Cat-in-a-Box’ app

RMS has launched a new so-called Cat-in-a-Box, cloud-based app which allows users to independently assess and underwrite parametric contracts for a small group of cedants, brokers, and underwriters to re/insurers or insurance-linked securities (ILS) funds.

Cat-in-a-Box deals—so called because they provide cover for a particular type of catastrophe in a given geographical “box”—have long been a solution for corporates looking for quick and effective protection, particularly for offshore energy platforms. Until now, a simple, consistent, and transparent methodology to model these transactions has been unavailable to the ILS community, said RMS.

With parametric deals, the terms of the contract are triggered by the location and parameters of the catastrophe—for example maximum wind speed or the storm category—rather than losses incurred by it. This means a quick decision can be made on whether a contract is triggered, resulting in a quick payment when it’s most needed, and no need to endure a lengthy claims process, said the firm.

The RMS Cat-in-a Box app, which operates on the RMS Miu Insights web platform, uses a simple graphical user interface. Users can adjust the geographic area and change hazard parameters to produce instant key risk metrics and Exceedance Probability (EP) curves.

Stephen Moss, director, capital markets at the cat risk management firm, said: “The new RMS Cat-in-a Box app makes modelling parametric risk dramatically more straightforward, opening up the opportunity for many more companies to transfer risk on this basis.

“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.”

He added: “With the numerous benefits provided by parametric structures combined with the ability to now better assess the risk using the new RMS Cat-in-a Box app, we fully expect the supply of parametric deals to increase as we approach the start of the 2016 hurricane season.”