Catastrophe loss modelling framework Oasis launches

The Oasis Loss Modelling Framework, a not-for-profit company backed by 21 insurers, reinsurers and brokers, including Lloyd’s and leading European and North American players, has launched and is now ready for use.

The initiative was announced back in 2011 at the Monte Carlo Rendezvous and for the past two and a half years has been developing an independent framework and risk modelling platform which it says is the most significant development in the modelling of natural catastrophe losses for 20 years.

Now the Oasis framework, which is open to anyone with an interest in creating new catastrophe risk models, is available to use. Oasis is owned by its members and is not-for-profit, which it says will bring down the cost of modelling, as well as providing transparency and greater flexibility for its users.

The Oasis framework is designed as a set of plug-and-play components (technically using web services), which can be developed by any member with the technical ability and can be adapted to meet many and various needs. Oasis aims to better inform risk selection, pricing and capital allocation, help insurers achieve more focused reinsurance negotiations, provide support for regulatory compliance and give users wider choice, greater transparency and lower cost in risk modelling.

Dickie Whitaker, Project Director of the Oasis Loss Modelling Framework, explained; “Oasis allows you to get your own view of risk. Much as apps have revolutionised smart phones, so Oasis can revolutionise the market for catastrophe models.”

Peter Taylor, Technical Director of Oasis, added; “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.”

Members can put their own risk models into the Oasis framework and then invite others, such as their reinsurers, to run the models too. Models can also be developed for license and sale to others, using Oasis. For launch, 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.

Tom Bolt, Director of Performance Management for Lloyd’s, said; “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.”

Trevor Maynard, Head of Lloyd’s Exposure Management and Reinsurance Team, stated; “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.”

Paul Nunn, Head of Natural Catastrophe Risk Modelling, SCOR Global P&C, commented; “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.”

Paul Miller, International Head of Aon Benfield Analytics’ Catastrophe Management team, gave a brokers 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.”

Having more options available to model risk, provide new views of risk and to aid in risk selection and pricing is invaluable. With Oasis providing a framework on top of which models can be developed it will be interesting to see how readily the market adopts it, or otherwise. Insurers, reinsurers and many insurance-linked securities market participants already create their own internal models, so using Oasis to do so may prove attractive.

The framework will be of value to the insurance-linked securities market as well, providing another view of risk. Dickie Whitaker said; “As the ILS market grows it will be vulnerable unless it understands more of the uncertainty inherent within catastrophe modelling, Oasis will help with that.”