RMS (Risk Management Solutions)

RMS (Risk Management Solutions)
Name	Risk Management Solutions
Type	Private
Founded	1987
Founders	Dr. Peter H. H. David, Christopher J. Landsea
Headquarters	Newark, California, United States
Industry	Insurance, Reinsurance, Catastrophe Modeling, Software
Products	Catastrophe models, Exposure management, Analytics
Num employees	1,000–2,000
Owner	New Mountain Capital (majority)

RMS (Risk Management Solutions) is a provider of catastrophe risk modeling, analytics, and software for the insurance, reinsurance, capital markets, and government sectors. Founded in the late 1980s, the firm develops probabilistic models for natural hazards and man-made perils, and supplies services used by insurers, reinsurers, brokers, investors, and regulators. RMS models are used to assess losses from events such as earthquakes, hurricanes, floods, wildfires, and cyber incidents, informing underwriting, portfolio management, and catastrophe bond structures.

History

RMS was established in 1987 amid increasing interest in probabilistic risk analysis following events such as the 1985 Mexico City earthquake, the 1987 Whittier Narrows earthquake, and the 1989 Loma Prieta earthquake, and drew on expertise from institutions including the United States Geological Survey, California Institute of Technology, Imperial College London, Massachusetts Institute of Technology, and the National Oceanic and Atmospheric Administration. Early investors and collaborators included players from Munich Re, Swiss Re, Lloyd's of London, Guy Carpenter, and Aon, and the company expanded through partnerships with academic centers like Stanford University, University of California, Berkeley, and Columbia University. Through the 1990s and 2000s RMS grew alongside major industry events such as Hurricane Andrew (1992), Northridge earthquake (1994), 1995 Kobe earthquake, and Hurricane Katrina (2005), prompting new model releases and acquisitions of firms in Europe, Asia, and Australia to address portfolios exposed in markets like Tokyo, London, Sydney, and New York City. Ownership changes involved private equity and strategic investments, including transactions with firms such as TowerBrook Capital Partners, Stone Point Capital, and New Mountain Capital.

Products and Services

RMS offers software platforms, catastrophe models, exposure management tools, and consulting services used by clients including Allianz, AIG, Zurich Insurance Group, Chubb Limited, and Berkshire Hathaway. Product offerings include on-premises and cloud-based analytics, application programming interfaces used with Amazon Web Services, Microsoft Azure, and Google Cloud Platform, as well as advisory work for World Bank and national agencies like Federal Emergency Management Agency and the Bank of England. RMS model suites cover perils and lines of business relevant to markets in United States, Japan, United Kingdom, Australia, France, and Germany, and are integrated into workflows of brokers such as Marsh & McLennan Companies and Willis Towers Watson. The company also supplies catastrophe bond structuring support to investors active in markets like New York Stock Exchange and Luxembourg fund jurisdictions.

Catastrophe Modeling Methodology

RMS develops probabilistic catastrophe models built from seismic, meteorological, hydrological, and wildfire science developed with collaborators at institutions such as Scripps Institution of Oceanography, Princeton University, University of Oxford, ETH Zurich, and National Center for Atmospheric Research. Model components typically include hazard modules calibrated to event catalogs like the International Seismological Centre dataset, exposure modules linking policy terms to building inventories derived from sources such as U.S. Census Bureau and satellite providers, vulnerability and damage functions informed by studies from FEMA, Japan Meteorological Agency, and reconstruction data from events including Great East Japan earthquake and tsunami (2011). RMS employs stochastic event set generation, ground motion prediction equations influenced by research from Seismological Society of America, synthetic storm tracks referencing methods from NOAA Hurricane Research Division, and probabilistic flood mapping informed by models used by the European Centre for Medium-Range Weather Forecasts. Outputs include loss exceedance probability curves, expected annual loss metrics, aggregate portfolio analytics, and scenario-based stress tests used for solvency frameworks like those from the Prudential Regulation Authority and Solvency II.

Applications and Industry Impact

RMS models underpin underwriting decisions, risk transfer pricing, reinsurance treaty design, and capital allocation across insurers, reinsurers, and capital markets participants including BlackRock, PIMCO, Goldman Sachs, and catastrophe bond investors. Regulators and central banks, including the Federal Reserve and European Central Bank, have cited modeled catastrophe exposures in supervisory stress testing and systemic risk discussions. RMS analytics have influenced post-event recovery planning after disasters such as Hurricane Sandy (2012), 2018 California wildfires, and Tohoku earthquake and tsunami by informing loss estimates, reserve setting, and claims-management strategies used by carriers like State Farm and Progressive Corporation. Academic researchers at Harvard University, Yale University, and University of Cambridge have used RMS datasets for resilience studies and economic loss modeling.

Corporate Structure and Ownership

RMS is a private company with a global footprint and regional offices in locations including Newark, California, London, Tokyo, Sydney, Singapore, and Paris. Institutional investors and private equity firms such as Apax Partners, KKR, Advent International, and New Mountain Capital have been involved at various stages, with corporate governance shaped by boards and executives who previously served at organizations like Munich Re, Swiss Re, Marsh & McLennan Companies, and Aon. Strategic partnerships and acquisitions expanded capabilities through purchases of specialist firms operating in markets like India and Brazil, and collaborations have linked RMS offerings to technology providers such as Oracle Corporation and Salesforce.

Controversies and Criticisms

RMS has faced scrutiny over model transparency, proprietary assumptions, and the concentration of modeling influence among a few vendors similar to critiques raised in venues such as United States Congress hearings and industry forums hosted by International Association of Insurance Supervisors and Insurance Information Institute. Critics from academic groups including University College London researchers and policy advocates tied to Oxfam have argued for open-data alternatives and more public-sector involvement after major losses from events such as Hurricane Katrina (2005) and 2011 Tōhoku earthquake and tsunami. Instances of disagreement between model outputs and empirical loss observations have prompted revisions and technical debates at conferences such as American Geophysical Union and European Geosciences Union, while regulatory bodies like the Financial Conduct Authority and national insurance commissioners have engaged in dialogues about model governance, validation practices, and reliance on third-party analytics.

Category:Catastrophe modeling Category:Insurance companies of the United States