RAND Corp. Launches New Company

Santa Monica-based nonprofit RAND Corp. announced Wednesday the launch of a new business to consult and sell software to property and casualty insurance companies.

It's the first time the public policy research organization has spun off a company for commercial purposes.

It teamed up with Newark-based Risk Management Solutions and private investors to start Praedicat Inc., which is expected to employ a dozen staff and locate in Culver City.

“The RAND Corporation is committed to pursuing innovative ways to extend the reach of our research and analysis,” Michael D. Rich, president and CEO of RAND, said in a statement. “This new venture will help us reach new audiences with solutions and expand RAND’s positive impact on society.” 

Praedicat will develop computer-generated “liability catastrophe models” to estimate losses that could be sustained by businesses and people in man-made catastropes, such as asbestos exposure or climate change.

Cat modeling is already used extensively by the insurance industry and other financial markets to manage the property and casualty risk posed by natural disasters such as hurricanes, earthquakes and terrorist attacks.

“With the emerging catastrophe risk technology that RMS and RAND have developed, the casualty insurance industry should be able to better manage man-made catastrophes while helping their clients avoid them,” said Robert T. Reville, a senior economist at RAND who will be the CEO of Praedicat.

Officials said they've tested Praedicat's models with several leading insurance and reinsurance firms while the technology was under development at RAND and Risk Management Solutions. 

“Modeling has transformed underwriting and catastrophe risk management decision-making for the property insurance market,” said Hemant Shah, president and CEO of RMS and a director of Praedicat. “RMS and RAND, and now Praedicat, are excited to extend this transformation to the casualty insurance market, taking it to the leading edge of an industry trend of deeply embedding analytics and models to increase risk-adjusted profitability.”

James A. Thomson, the former president and CEO of RAND, will serve as chairman of the Praedicat board of directors. Along with Thomson, Reville and Shah, the board also will include Siddhartha Dalal, chief technology officer of RAND, and Jacques Dubois, a private investor and former chairman and CEO of Swiss Re America Holding Corporation.