In her overview of the market conditions facing the casualty reinsurance market during a recent ‘Reinsurance Renewal Season’ briefing from Aon, Amanda Lyons noted that the upcoming renewal season will be a “very analytical renewal for all our clients”.
Following on that theme, Paul Shedden, global analytics leader for Aon Reinsurance Solutions, highlighted some of the practical solutions his team is implementing to help clients make the best decisions during the renewal period. Aon’s view, he said, is that you need to have a solid understanding and view of the risks you face to make the best decision on capital, which then supports you in achieving the best financial outcomes possible.
Aon’s ambition is to do whatever it can to facilitate that process, which requires access to a wealth of capability and insights. With that in mind, the firm has spent several decades investing heavily in its core analytical talent, software, and data and research. “All of this is aimed at ensuring that the decisions our clients are making are grounded in a solid reality, which we think is incredibly important to renewals.”
None of that is new, Shedden noted but what is new is the increasing complexity of the external risk environment. As a result of that, the data and analytics that firms have the ability to consume and then analyze are becoming stronger than ever. Internally, Aon is responding to this changing environment in a number of ways, including its 3X3 strategy which outlined three commitments to go further and faster to accelerate its Aon United strategy over the next three years.
“That did two things that are particularly interesting from an analytics point of view,” he said. “It involved a huge amount of investment. So, we've got a significant investment pipeline over the next three years. It also involved an internal reorganization.
“We created Risk Capital which means, from an analytics point of view, that we can leverage our analytics teams across both the commercial risk and the reinsurance areas to be able to respond to that complexity, to be able to respond to the fact that the world is giving us more data and more insights, and so we need to enhance our own teams to be able to ensure that we're giving you the best insights at those renewals.”
Analytics has always had an important role to play in providing the best insights, Shedden said, but with its Risk Capital Foundation – as well as new investment recently announced – Aon has an enhanced focus on analytics. Offering examples of this focus, he spotlighted that for its corporate clients, Aon has rolled out a suite of risk analyzer tools to help clients make better decisions, initially across the property, casualty and D&O classes – with more to come later in the year.
For insurance clients, Aon is continuing to invest heavily to give them better insights into the risks they face. An example of this is around US severe convective storms (US SCS) where the company has rolled out a new model, backed by significant research to address, to provide insight that goes beyond what current vendors are addressing. “We were going into clients and finding US SCS was a significant problem, and so we responded by building a model.”
Climate remains a significant area of uncertainty across the market. Shedden highlighted how the launch of Risk Capital meant that Aon could combine its teams across commercial risk and reinsurance to create one critical mass all looking to solve this difficult problem. With decades of investment in natural peril modeling, Aon is in a strong position on climate, he said, which is allowing it to develop a granular view of how different climate scenarios might play out in the future.
“In the course of the nine months of bringing that team together, we've already started to see some of the fruits of that,” he said. “We’ve launched our Climate Risk Monitor that allows you to picture scenarios across different extreme catastrophe events in different scenarios, not just looking for the next 12 months. It also looks at things other than catastrophe events, such as chronic perils such as heat or freeze etc.”
Alongside this is Aon’s investment in its transition abilities, and how it can help insurance clients figure out how to measure transition in their corporate clients, and the impact that has on their portfolios. Now one year into its three-year vision of investment, there’s a lot more to come from Aon, he said, and it will look to continue to make the investments necessary in order to provide clients with the best insights possible. “This is going be an analytical renewal, and we want to make sure that those analytics are there.”
