Risk Financing Analytics
Helping organizations make data-driven decisions to optimize their total cost of risk.
Risk finance decision making can be difficult: the markets for risk are dynamic, and corporate exposure changes rapidly amid forces such as inflation, growth, and emergent risks. Organizations don’t always see the full value of insurance transactions, and business leaders need to make decisions in the context of changing corporate priorities.
What is Risk Financing Analytics?
Risk Financing Analytics (RFA) helps organizations instantly and confidently evaluate different approaches to risk, identify the most efficient insurance programs and make better data-driven decisions – optimizing the balance between risk tolerance and risk transfer decisions. Whether modeling the nuances of total cost of risk or building a holistic, multi-line risk financing strategy, RFA helps organizations capture the value of insurance transactions.
How does Risk Financing Analytics work?
RFA is bespoke to an organization’s risk profile and comprises of three key steps:
1. Establishing Risk Tolerance: RFA helps set boundaries for insurance programs in line with an organization’s ability to retain and absorb risk and its corporate financial objectives.
2. Loss and Volatility Modelling: With thousands of catastrophic and non-catastrophic loss scenarios, RFA helps organizations thoroughly understand their current individual and portfolio-wide risk exposures. This establishes a baseline loss expectancy for program comparisons and enables a better understanding of current program effectiveness.
3. Program Design Enhancement: RFA’s real-time, data-driven insights empower organizations to find the optimal insurance program structures to meet their needs. By combining dynamic loss-modelling analytics and risk-transfer market pricing for each line of an organization’s business, we can help organizations compare the costs and benefits of their available risk management and insurance program options.
What are the benefits of Risk Financing Analytics?
We use Risk Financing Analytics to help organizations make more informed, data-driven decisions around managing total cost of risk. These powerful insights help clients clearly understand the cost and benefit of different program options and the potential impacts of their decisions.
Benefits
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Compare portfolios in real time
Measure the costs and benefits of different insurance programs and get an up-to-date view of alternatives to your current insurance portfolio.
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Combine different insurance structures
Understand the best options by mixing and matching limits, deductibles, alternative risk transfer and other insurance structures in a bespoke portfolio.
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Achieve total cost of risk optimization
Develop an insurance program that accounts for your risk tolerance, a full range of available options and the best way to balance risk retention and risk transfer.
Case studies
A large food and beverage client with two captives was renewing their insurance program and asked Aon if their structure could be more efficient. We undertook market analysis and an actuarial review for each line of business using RFA. We modeled the impact of changes in expected losses and cost of capital to identify the most efficient program structure. The client increased retentions, with an initial 4% reduction in premium. A further 13% annual cost reduction was applied based on the new efficiencies.
A consumer goods client had a new CFO that was keen to assess their organization’s insurance program with an independent, data-driven view of risk tolerance. Aon completed an RFA exercise across property damage and business interruption, private placement life and marine, including natural catastrophes. The study estimated tolerance to unbudgeted loss and established a framework for optimum insurance purchasing. With reduced volatility and a better understanding of the market around their total risk cost, Aon helped reduce their annual premium costs by 5%.
5%
With reduced volatility and a better understanding of the market around their total cost of risk, Aon helped a consumer goods client reduce their annual premium costs by 5%.
At Aon, we use our experience and analytics capabilities to help clients ensure they achieve value from their insurance programs and align risk transfer strategies with their risk tolerance.
FAQs
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Who can Risk Financing Analytics help?
RFA is primarily aimed at optimizing large companies’* major placements, for example, where premium spend exceeds USD $1 million per class.
*USD $1 billion or more in annual revenue
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What data is required?
Loss history, exposure data and policy information (limits, retentions, coverages, and premiums) are required to deliver accurate output along with key financials and KPIs. For existing clients, Aon can typically source this data internally.
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How do I find out more?
If you want to learn more about RFA and how we can help your organization manage risk, contact us using the form below, and a team member will get back to you to arrange a conversation or demo.
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$1B
RFA is primarily aimed at optimizing large companies’ (USD $1 billion or more in annual revenue) major placements, for example, where premium spend exceeds USD $1 million per class.
