The Oasis Loss Modelling Framework has unveiled what it describes as “the most significant development in the modelling of natural catastrophe losses for 20 years”— the launch of an independent, global, open framework for use by any party with an interest in creating a catastrophe model.
Twenty-one insurers, reinsurers and brokers, including Lloyd’s and leading European and North American players, own Oasis, which is calls itself a framework for independent catastrophe modeling. The group said it is now ready for use.
The framework is open to “anyone with an interest in creating new catastrophe risk models,” said the launch announcement. It’s owned by its members and is not-for-profit. It is designed to “bring down the cost of modeling, as well as providing transparency and greater flexibility for users.”
“It is clearly key for the market to have model transparency and choice. Oasis, an open framework, clearly adds to the pool of knowledge and gives choice to the market. It is exciting that after two years in development, Oasis members have software that they can use in addition to existing solutions,” said Tom Bolt, director of Performance Management for Lloyd’s.
Dickie Whitaker, project director of the Oasis Loss Modelling Framework, said Oasis allows users to get their own view of risk. “Much as apps have revolutionized smart phones, so Oasis can revolutionize the market for catastrophe models,” he said.
Oasis is designed to operate as a set of plug-and-play components (technically, web services), which can be developed by any member, to meet many and various needs.
According to the participants, the potential benefits for the insurance industry include:
• Better informed risk selection, pricing and capital allocation;
• More focused reinsurance negotiation;
• Support for regulatory compliance;
• Wider choice, greater transparency and reduced cost in modelling.
“The Oasis Framework reveals the uncertainties in pricing and capital adequacy following from variations in model and portfolio data and from within the calculations themselves. The quantitative insights into what we don’t know will help us make better informed decisions,” said Peter Taylor, technical director of Oasis.
It would appear to be extremely flexible, as members can put their own models into the framework, and they can invite others, such as reinsurers, to run them, too. They are also able to develop models for sale or license to other users.
“Because Oasis materially lowers the cost barriers to entry, scientific and technical experts can provide fresh views on the scientific and building vulnerability aspects of catastrophe risk management,” said the group announcement.
According to Trevor Maynard, head of Lloyd’s Exposure Management and Reinsurance Team, Oasis provides a global standard to allow model developers to interact worldwide and for insurers to rapid gain access to their insights. “That is very exciting and potentially very important,” Maynard said.
Paul Nunn, head of Natural Catastrophe Risk Modelling, SCOR Global P&C, commented that the Oasis framework “brings genuine innovation and choice to the catastrophe risk modelling landscape and is particularly welcome against a backdrop of increasing insurance industry requirements.”
The announcement said that initially a number of commercial models will be available, including four for flood, (two for Great Britain plus Australia); three for earthquake (USA, North Africa and Middle East), Cascadia tsunami and Brazilian bush fire.
Paul Miller, international head of Aon Benfield Analytics’ Catastrophe Management team, gave his insight on Oasis from the broker’s perspective: “The re/insurance industry requires catastrophe modelling solutions to deliver transparency and flexibility across peril models and software platforms. Oasis will assist in the delivery of such requirements and aid end users in developing a bespoke view of risk.”
The announcement pointed out that although the insurance industry is expected to be the main user of Oasis, the framework can be useful to others interested in natural catastrophes including risk managers in large corporations, governments and inter-governmental bodies.
Oasis has a website and also released a fact sheet with the names of the companies and organizations involved in the project and other facts (see below).
In 2014 the cost of a membership, which is now open to all, is £20,000 [$33,200]. Oasis said that as other revenue sources come on stream, this figure is expected to reduce substantially. For this, members get direct access to the code and participation in the community working parties.
Source: Oasis and Lloyd’s