Why RMS Built Its Cloud Environment in Iceland

Risk Management Solutions is a provider of catastrophic risk models that, in the last few years, has expended its portfolio management services at the behest of its insurance and reinsurance customers.

In the process, RMS has become a de facto cloud service provider, its clients now able to combine existing actuarial data with risk modeling data from RMS to improve underwriting and portfolio management tasks using a system known as RMS(one).

The applications that provide such analysis are understandably data- and compute-intensive, says John Stanford, director of cloud architecture and engineering for RMS. It was only a matter of time before the firm — based in Silicon Valley but with offices in nine time zones — needed a global data center.

RMS decided on Iceland. It wasn’t long after the Eyjafjallajökull volcano erupted, though, and the Nordic nation found itself in the midst of a financial crisis that saw all three of its major private banks collapse. Many wondered if building a data center in Iceland was worth the risk, Stanford says.

RMS thought so — the firm knows a thing or two about risk analysis, after all — and opened its RMS Cloud environment on Sept. 19. RMS now occupies part of a 44-acre data center campus located 45 minutes from Iceland’s capital of Reykjavík at the site of a former NATO Command Center.

If NATO’s geological data deemed the site suitable for storing missiles, says Lisa Rhodes, vice president of corporate strategy and market development with Verne Global, which owns and operates the facility, then it’s good enough for a data center.

Iceland Appeals to International Firms With a Catch That Benefits Locals

Rhodes says Iceland offers several advantages when a firm is choosing a data center location. (Verne Global also counts Climate Action and BMW among its tenants.)

The island can claim consistent temperatures, proximity to North America and Europe, a new power grid and a steady supply of renewable energy — largely geothermal but also hydroelectric and, increasingly, solar — which lets firms predict energy costs as far as 20 years into the future. Even if there’s another volcanic eruption, prevailing winds will likely blow the ash toward Europe, Rhodes says.

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Stanford adds that Iceland’s government, in an effort to attract international business, charges no value-added tax (VAT) to companies that operate in Iceland but don’t have an office there. Part of that rationale is to thus encourage those companies to partner with Icelandic firms. This has the added effect of encouraging what Stanford describes as a “highly educated and technologically astute” workforce to pursue certification and training while building a new managed services industry in Iceland.

Cloud Architecture Encourages ‘Freedom and Flexibility’

With the RMS Cloud up and running, the insurer’s clients no longer have to run risk models on their own servers, using a product that had to be shipped to clients, Stanford says. The cloud architecture gives them the “freedom and flexibility” to perform additional analyses as necessary. Datapipe’s Stratosphere Hosted Private Cloud platform handles peak loads in Verne Global’s data center.

Plus, Putting the cloud environment in Iceland places it in close proximity to Amazon Web Services data centers in London and Dublin. (The island also has redundant cables that link it to Europe and Boston, the latter via Greenland and Nova Scotia, Rhodes says.) This is good for latency, Stanford says, and also helps when RMS needs to boost capacity in the event of a catastrophe or an insurance policy renewal. “We’re aiming to automate at scale as much as possible,” he says.

Finally, the scalability may give RMS the opportunity to offer RMS(one) to clients beyond the insurance industry that need to calculate risk, Stanford says, specifically citing real estate and government agencies.

Brian Eastwood is a senior editor for CIO.com. He primarily covers healthcare IT. You can reach him on Twitter @Brian_Eastwood or via email. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.