Lloyd's Market Association Bulletin

LMA14-038-PH | 21 October 2014           

           

Oasis Solutions Project: Update

Background

The Oasis Solutions Project (OSP) is a proposal to:

  • create an easily accessible, custom built user interface for Oasis (see below) which can be used by managing agents as an additional or alternative platform for catastrophe modelling
  • pay for conversion of the ARA US Hurricane model onto the Oasis platform to provide alternative views of risk and greater choice of models
  • create the opportunity for managing agents to licence the ARA model on a shared services basis at a significant discount to single licence costs and existing models. This would be the first such agreement in the Lloyd’s market for catastrophe models, and would provide a template for negotiation with other catastrophe model providers in future
  • develop standardised model validation protocols which will provide catastrophe modelling professionals considerable support in the annual model validation exercise under Solvency II.

Oasis Loss Modelling Framework (Oasis) is a plug and play solution that, through standardisation, will allow multiple model developers to prepare models in the knowledge that they are in a format the insurance industry has endorsed and can use immediately. We believe this will enlarge the current market place for catastrophe models and provide greater choice, a wider range of perspectives, and the opportunity to streamline processes such as contract negotiation, validation and IT.

Market support for the OSP

Market support for the OSP has been very encouraging. The recent LMA/Lloyd’s consultation exercise led to a total of 14 additional managing agents joining Oasis (13 were already members). All 27 Oasis members have indiated that they are willing to provide the necessary support to the project. As a result, Lloyd’s has agreed to provide funding and the project has now started with the formation of a Steering Group, comprised of the following members:

Rupert Atkin    LMA Chairman/Talbot
Richard Dixon   Hiscox
Steve Gentili   Cathedral
Neil Maidment     LMA Board member/Beazley
Trevor Maynard  Lloyd’s
Jakir Patel   Scor
Rob Stevenson     EMWG Chairman
Peter Taylor   Oasis
Dickie Whitaker    Oasis
Patricia Hakong/Gary Budinger       LMA Executive


Anti – competition


The OSP is not intended to create a model that the entire market will use for pricing or otherwise. It is anticipated that managing agents will make adjustments to the models as necessary to ensure they are in line with their own view of risk.
           
Short term benefits:

  • shares the cost and risk of model validation and brings best practice guidelines to the market
  • delivers a full “solution” saving the costs and risks of individual developments of front-ends, hosting provision, and consultancy for deployment into each managing agent’s business
  • shared-services price benefits – An Oasis deployment reduces costs of models, starting with the US hurricane model, thanks to volume discounts and economies of scale for testing and deployment
  • provides a low-risk benchmark methodology for delivering models practically through Oasis (which itself only provides the 'plug-and-play' kernel)
  • demonstrates the value of increased model transparency in underwriting.
Long term benefits:
  • achieves shared services price benefits
  • offers the potential for market-wide use of the chosen model as a benchmark against which to compare existing models
  • provides access to markets for suppliers (for models, hosting, and front-end
  • establishes some practical standards for validation of cat models
  • develops some standard industry databases for model evaluation
  • simplifies model licensing process
  • brings new hosting providers to market to offer viable alternative to current options
  • allows front-end software providers (whether new or existing) to integrate Oasis into their workflow for data input and results output.

Next steps:

  • the OSP Steering Group will meet in November to finalise the detailed project plan, including the timetable
  • a presentation on the project will be held in mid-December in the Old Library
  • regular updates will be provided by the OSP Steering Group to Lloyd’s and the LMA Board
  • market sub-groups will be formed to take forward some of the technical aspects of the work with Oasis.

If you have any queries on this project, please contact: patricia.hakong@lmalloyds.com or gary.budinger@lmalloyds.com.
          
Patricia Hakong
Director, Finance and Risk Management