The components feeding the central calculation kernel with data are:
- Hazard Model: a model that produces frequency/severity attributes for a set of events relating a particular peril by location. These events purport, according to the model, to represent the class of events that could, rather than have, occurred, though they can include repeats of known catastrophes for benchmarking purposes. Hazards may not be independent, such as aftershocks from earthquakes, which is often expressed in correlations that govern the annual stochastic simulation (see Annual Simulation Module, below). A further aspect of the Hazard Model is the modelling of associated perils such as “fire following” earthquake shake, and coastal and estuary storm-surge from tropical cyclones making landfall.
- Vulnerability Model: a model that determines the damage level a given insured asset will suffer, for a given level of hazard. In many ways this is the most critical element as it depends on engineering assessment of damage combined with economic models of reinstatement costs, plus calibration of these parameterized model distributions of loss caused by damage against actual claims data from industry suppliers of information. These are the “damageability functions” and typically based on empirical correlations between the hazard intensity measure (such as peak ground acceleration or sustained maximum wind speed) and actual claims, expressed as the ratio of “ground-up” loss to the Total Insured Value (TIV).
- Exposure Data Capture Module: a data store/input to hold details of the location, physical building characteristics, occupancy type, insured value.
- Policy/Line Data Capture Module: to import policy structures, coverages, and deductibles, limits/lines.
- External Data which allows for third-party data such as code tables, exposure databases, benchmark portfolios,built environment databases to be used by the Oasis Framework.
- Results Viewing Module which, like the data capture Modules, could be defined within or without the Oasis Framework, provides tools for the user to aggregate, analyse, and view the model outputs (e.g. maps, graphs, tables).
The key constraint on these “plug-and-play” components is that they must provide data in a standardised manner to the central simulation “kernel” which is an Annual Simulation Module with two related modules:
- Annual Simulation Module: this is not always used today in commercial loss models, but is proposed as a standard in that events are extracted from a catalogue of events in conjunction with a correlation model to simulate many thousands of years. Constructing this sampling, within which the Ground-up Loss Module is run, is not part of Oasis, but a feature of the providing model.
- Ground-up Loss Module: this component combines hazard intensity with exposure through the vulnerability measures of damage to compute the losses. Typically this will be a stochastic (Monte-Carlo) simulation allowing for the uncertainties in the source components expressed as probability distributions or percentile histograms.
- Financial Module: a component that takes results from the Ground-up Loss module and computes the financial losses to insurers by applying insurance terms and conditions (deductibles, limits, reinsurance and possibly alternative risk transfer products).