Oasis Financial Module: Latest Upgrades
The Oasis Financial Module (FM) now utilises a 'full' Monte Carlo sampling approach in its calculation engine
The Oasis FM was developed and approved in collaboration with many market practitioners and is a performant and extensive calculation engine for cat losses.
The Oasis FM applies the financial terms and conditions supplied in the Open Exposure Data format (OED) account and reinsurance input files (‘Acc’, ‘ReinsInfo’, ‘ReinsScope’) to the ground-up (GU) losses that have been calculated from the exposure, hazard and vulnerability functions within the model runs in Oasis. Applying the financial terms to the GU losses, generates the gross (GR) and net of reinsurance (RL) financial perspectives.
The 'Full' Monte Carlo Approach
Oasis has always used a Monte Carlo (MC) sampling approach where individual GU loss samples are generated and passed through the financial terms for direct insurance policies and reinsurance. This closely replicates the real-life process in insurance of determining pay-outs from individual claims, enabling correlation in losses across locations to be modelled at the most detailed level. This leads to better representation of spatial correlation and modelled uncertainty in the resulting GR and RL distributions, compared with applying policy terms to probability distributions of loss and combining them with correlation assumptions afterwards.
In January 2023, the Oasis FM was developed to support a “full” MC simulation approach which involves taking a random sample of hazard from each event and then, given the hazard intensity, drawing a second sample from the damage distributions in the vulnerability functions, for each exposure.
This enables model providers to have greater control over their correlation assumptions and be able to specify hazard correlation and damage correlation separately. This will provide a more accurate representation of the location and vulnerability uncertainty and when modelling aggregate locations as multiple risks rather than as single risks.
FM Development Road Map for 2023
The Oasis FM will be developed to support the following functionality in the next six months:
- Peril based terms: Outputs by peril at each hierarchical level for all special conditions. This is supported in OED.
- Special Conditions: At the coverage level.
- Reinstatements: Implementing time-based modelling outputs.
- Account level terms by coverage: This is not widely used but would be beneficial as a complete suite of outputs.
2023 So Far..........
It's been a busy start to the year for Oasis, so here's a quick recap:
January: We hosted a very successful and insightful seminar at the Old Library in collaboration with Lloyd's on 'Modern Pricing: Update Your Methodology'. This was a very well attended event and the recording of the speakers can be found on our You Tube Channel:(https://www.youtube.com/watch?v=23qGW3DlLpE).
February: We were thrilled to be awarded the 'Catastrophe Risk Modelling Solution of the Year' Award 2023 at the Insurance ERM awards (https://www.insuranceerm.com/content/awards/insuranceerm-annual-awards-2023-uk-and-europe/winners/catastrophe-risk-modelling-solution-of-the-year-oasis-loss-modelling-framework.html)
Oasis attended the RAA conference in Orlando. We had some great conversations with the wide cat modelling community where we got to discuss the huge benefits of the Oasis platform and hear from some great speakers.
March: We are now well into the planning of the Oasis Insight conference in London on 3rd-4th May in collaboration with the LMA. We have some fantastic sessions and world-class speakers that will ensure this is an excellent and truly independent event.
Register here: https://oasislmf.org/events/oasis-conference-collaboration-lloyds-market-association.
Hope to see you in London in May.
Please get in touch if you have any questions.