Target: Bermudian graduates
Catastrophe risk modelling company Risk Management Solutions Inc. has opened a local office to provide on-the-ground support to the 25 Bermuda-based insurers and reinsurers it counts as clients.
Bill Keogh, RMS senior vice president and managing director for the Americas region, told The Royal Gazette the company has hired its first Bermuda employee, and also plans to recruit young Bermudian university graduates to train with the company.
Bermuda is the fifth country RMS has moved into, with it already having four principal offices in the US, a London office, Paris office, and a joint venture in Japan.
Mr. Keogh, who is set to meet with clients at a special meeting to launch the RMS Bermuda operation today, said millions of dollars can be budgeted by each company, annually, for a licence to give one access to the RMS modelling system, and to pay specialised employees to run it.
But the specialists are hard to come by, especially Bermudian ones, which is one of the reasons RMS is here.
Mr. Keogh explained that feedback from some Bermuda clients was that there was a need for young Bermudians to be recruited into the specialised field.
RMS plans to fund scholarships for Bermuda students, and recruit and train those with an aptitude.
Graduates with a mathematics or actuarial background, or other areas related to risk modelling, such as meteorology or engineering, could be a good fit, he said.
RMS' first local hire, Chernell Campbell, joined the company as senior account manager from XL Capital, previously having worked with Commercial Risk and Tempest Re.
RMS licenses its modelling systems to insurers and reinsurers around the world, but the system is only one part of a complex process to assess the probability over losses occurring on a particular insurance policy, over a period of time.
Ultimately the model is only as good as the specialist running it, called modelling 'practitioners'.
"The models are fairly complex. There is a fair degree of control by the user that can affect [the outcome," he said.
Bermuda-based clients count for about one-quarter of RMS' total customer base. "What is significant over the last couple of years is how Bermuda has evolved to more insurance and reinsurance (from being primarily reinsurance)," he said, adding that while RMS was set up 16 years ago, it has itself seen rapid growth and change in the last five years.
RMS, which specialises in helping insurers and reinsurers predict the probability of both natural and manmade hazards, is the leading company of its kind.
Part of the reason it has been so busy in recent years is the increasing demand for modelling systems that can assess the risk of a terrorist attacks. As well, Mr. Keogh said reinsurers and insurers are now more interested in doing everything they can to assess risk.RMS has two rivals - Applied Insurance Research (AIR) and EQE International. He said the company is the leading provider with more than 50 percent market share, although some companies employ the modelling systems of more than one company.
It might not be easy to conceptualise how risk modelling works but a recent joint venture by the company should give some sense of how much an effort the company makes to gather information to inform the modelling process. In July, RMS funded technology improvements for the Florida Coastal Monitoring Program, a joint venture to develop full-scale experimental methods to quantify near-surface hurricane wind behaviour and the resulting loads on residential structures.
The system does more than predict the chances that, within a period of time, catastrophes will occur within a geographic area. It also helps insurers and reinsurers price policies at a level that should prove profitable, bearing in mind the catastrophic probability of any given contract.
The company, which was developed at Stanford University and is owned by UK publishing empire Daily Mail Group, does not do much in the way of proprietary work with individual clients. "Our business model is to build models that can be used by all of our clients," he said.
The fact that RMS isn't owned by an insurance company and develops its models independently of any insurer, has been seen as a positive, Mr. Keogh said.