Bitesize InsurTech: Oasis LMF
March 22, 2019 Chris Sandilands
Oasis Loss Modelling Framework provides an open source platform for developing, deploying and executing catastrophe models.
The business was set up in 2012 as a non-profit funded by (re)insurers. Following the various mergers that have taken place since, around 35 (re)insurers remain members.
Dickie Whitaker, CEO, is a former head of Guy Carpenter’s analytics team. Before founding the business, he was working with the Knowledge Transfer Network, a ‘network partner’ of the UK government body Innovate UK, helping to connect business and entrepreneurs. The opportunity he saw was in catastrophe modelling, connecting academia to the private sector. As he says: “once I started on the challenge, I couldn’t stop.”
Oasis LMF – in lay(wo)man’s terms – provides the tech platform that sits between risk models and insurers’ portfolio data. It allows insurers to model their exposure to certain natural catastrophe events. The big difference to many other exposure management systems – RMS and AIR being the most commonly used – is that the Oasis platform is open source, free and allows companies to choose the models that they want to implement.
Put another way, Oasis is the manufacturer of “pick and mix” counters for sweet shops, but it does not make the sweets itself. So, for example, an insurer may decide to choose a flood model developed by a specialist firm such as JBA and an Australian storm model built by an academic at the University of Sydney. This flexibility should provide a better alignment to the company’s portfolio.
Oasis is currently being used by a growing list of companies such as AXA as their primary modelling platform, and (re)insurers such as Allianz, Swiss Re, Chubb, Ren Re, Ascot, Beazley and others as their alternative one. Oasis is also being developed for governments to understand their disaster exposures.
The company is currently rolling out enhancements to the system such as full interoperability with other systems and a new user interface.
The Oxbow Partners view
Oasis is pursuing a noble cause – an InsurTech providing an open source solution to the industry. The proposition should be attractive to the market given the significant licence fees paid for the incumbent software and it is therefore not surprising that several of the large European (re)insurers and Lloyd’s managing agents are signed up both as members and users.
But insurance is a challenging ecosystem to penetrate. Systems are established and built to be resilient; displacing an incumbent is hard. This is true in many areas – whether creating a new distribution partnership, deploying new data sources for pricing, or implementing a new approach to exposure modelling.
Exposure modelling is arguably a particularly hard nut to crack. Model output is critical to an insurer’s capital management and therefore an area of focus for regulators. Any change needs to be clearly managed and signed off. Switching costs are therefore high, even if there is plenty of evidence that a switch to Oasis reduces run costs significantly in the long term. Progress is steady but will never be rapid compared to other InsurTechs.
Oasis does, however, have some tailwinds. Dickie reports that his point of contact in organisations is broadening from exposure management teams to the board room as insurers focus more on how to manage their costs. Partnerships in the disaster risk reduction world are also helpful. For example, the Oasis framework was recently used to support the deployment of JBA’s Sri Lankan flood model, facilitating the operation of a reinsurance-backed, state-funded flood scheme for low-income residents.