Moody’s to Buy Risk Modeling Firm RMS for $2B

Moody’s has agreed to acquire the RMS analytics unit of the publisher of the Daily Mail for about $2 billion in a move to add disaster and climate-change risk modeling to its solutions for the insurance industry.

RMS, which stands for Risk Management Solutions, is a pioneer of the catastrophic risk business, running more than 400 models covering 120 countries that property and casualty insurers use to better understand, measure, and manage risk.

According to Moody’s, the acquisition will immediately increase its insurance data and analytics business to nearly $500 million in revenue and accelerate the development of its global integrated risk capabilities.

“Climate change is an issue that demands urgent attention,” Moody’s CEO Rob Fauber said on a call with analysts, adding that the deal will help customers manage exposure to climate-change risks in their investment and lending portfolios and meet regulatory requirements related to climate change.

As The Wall Street Journal reports, “Insurers and reinsurers, which traditionally focused on predicting big events that can cause widespread damage, such as earthquakes and volcanic eruptions, are increasingly incorporating other models that look at smaller, but more frequent events that cause damage such as hail, drought, wildfire, and snow.”

“Climate change and catastrophic events like extreme weather, pandemics, and cyberattacks have broader and more harmful impacts across virtually all industries,” RMS CEO Karen White said.

Newark, Calif.-based RMS is currently owned by Daily Mail and General Trust, which purchased the company for about $210 million in 2011. It has grown with the increased frequency of natural disasters that are changing the way insurers price coverage.

The business is expected to generate revenue of about $320 million for the fiscal year ending Sept. 30, according to Moody’s.

“RMS will meaningfully accelerate Moody’s integrated risk assessment strategy for customers in the insurance industry and beyond, with significant capabilities across climate, cyber, commercial real estate, and supply chain risk,” the company said.

The Times said the price of the deal was higher than many analysts had expected, valuing the division at 38 times underlying earnings.