Will loss-modelling project prove to be an Oasis for risk managers?

The not-for-profit Oasis Loss Modelling Framework, which took two years to develop, is designed to make it easier for new entrants such as scientists and technical experts to provide fresh views to the market on the scientific and building vulnerability aspects of catastrophe risk management.

Several commercial models are due to launch shortly, including one for flood in Australia, while a Thai flood model is expected to be released later this year.

Although the insurance industry is expected to be the main user of the framework, project director Dickie Whitaker said it could be useful to anyone who was interested in natural catastrophes, “including risk managers in large corporations, governments and inter-governmental bodies”.

“For years corporate risk managers have sought to get more appropriate risk models for site analysis,” he said. “Oasis should stimulate providers to fill this gap.

“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.”

Whitaker, who was managing director of Guy Carpenter’s quantitative analysis and modelling services unit from 1985 to 2010, said that there had traditionally been “significant barriers to entry” caused by the complexity of building these types of tools.

However, under Oasis’s framework access to the simulation kernel and financial module – the element of the model that calculates financial losses by applying insurance terms and conditions – will be given away for free.

“Experts will no longer have to understand about insurance terms and conditions to be able to deliver their science to the insurance community because everything is done for them,” Whitaker said.

“This way a hydrologist can concentrate on a flood model. By opening up this system we allow any academic or specialist company from around the world to deliver their knowledge of environmental risks and damage. We’re going to be attracting many more people to bring their science to the industry.”

The framework features ‘plug and play’ data interfaces and web services that enable users to calculate insurance losses. Members can put their own models into the framework, and also invite others to run them, too. They also have the option of developing models for sale or licence to other users.

Smarter Planet leader at IBM Cathy Pickering said that Oasis enabled a better understanding of global insurance risk and would also leverage available academic research to develop resilience plans for cities and local communities.

“The Oasis software kernels and data standards provide these different stakeholders with an open-access approach that will stimulate innovation in both the private and public sector,” Pickering said.

Whitaker said that, in the medium term, Oasis could save international insurance or reinsurance companies about 50% on their catastrophe modelling costs.

Oasis is owned by 21 insurers, reinsurers and brokers. Founding members include Allianz, Aon Benfield, Guy Carpenter, Liberty, Willis and Zurich.