Data advancements take industry step closer to risk ‘nirvana’

“It’s absolutely essential to allocate time and effort to understanding the underlying risks to which your business is directly exposed, or exist in your portfolio. That understanding will drive better strategic decisions,” said Paul Shedden, Aon’s head of analytics for Risk Capital, while shedding light on harnessing technologies to reshape the industry.

One of the most significant shifts is the improved quality and availability of data, Shedden explained. “The ability to ingest data at scale and in a more automated way means that data processing is catching up with the advanced analytical capabilities we’ve had for a long time,” he said. 

“That offers a whole range of opportunities that become quite mesmerising,” he added.

This evolution has laid the groundwork for the developments Aon is currently pursuing. 

The company’s focus is on improving analytics and transforming how data is utilised across the industry, and Shedden highlighted that, in his experience, “the ability to analyse data has traditionally been better than the data we’ve had to analyse”.   

“We made a specific decision to invest in our core data and core analytics.” 

New tools for clients

However, this is changing rapidly. Shedden explained how new techniques and tools were revolutionising data analysis, and how these tools would fundamentally alter the industry’s approach to risk.

In view of this, Aon took a major step last year to bolster its analytical capabilities. 

“We made a specific decision to invest in our core data and core analytics,” Shedden shared.

This investment spans multiple projects, including the development of analytical tools designed to help corporate clients understand their risk exposure better.

“It’s not a ‘once and done’ process: we’re investing in them continuously,” he stated.

He hinted at upcoming advancements, saying: “We’re developing platforms through which our clients will be able to access and see information in a much better way than they have previously.

“Being able to comprehensively assess client risk appetite, the underlying risk, and the insurance capacity available, means we have a very powerful suite of analytics that allows clients to make optimal strategic decisions and pursue profitable growth opportunities.

“It also allows us to identify the most appropriate source of capital for particular exposures. All this brings clarity and confidence to the risk transfer process. 

Shedden strongly believes this approach will have positive repercussions. “As you quantify and understand risk, it opens-up possibilities in the capital market that encourages re/insurers to take risk: ‘Why am I prepared to take more exposure to this risk? Because I can now start to understand that risk’,” he said. 

“Climate analytics is a significant growth area, because the capability we’ve developed on the natural peril side over the course of the past 25 years naturally dovetails into that advice.

“Climate advisory requires a deep understanding of natural perils, and so we’ve been collaborating on climate research with a range of global academic institutions to try to ascertain trends over the medium- and long-term. This means we have a very powerful climate offering that we can take to the market,” he added.

Reaching the risk nirvana

The integration of Aon’s analytics across its various business lines is a key focus, and Shedden elaborated on how Aon is working to create a unified analytical framework. 

“We brought together our commercial risk and reinsurance analytical capabilities under the umbrella of Risk Capital,” he explained, noting that while natural boundaries still exist, there were significant opportunities “in this analytical revolution” to leverage investment and expertise across both areas.

Shedden spoke about the importance of expert knowledge within Aon. “We have more than 1,000 individuals who are deep specialists in their chosen area of expertise, whether that be climate science, flood risk or cyber risk experts, who can create insights backed by real science,” he said. 

By sharing this deep expertise across client segments, which technology is enabling, Aon aims to provide more comprehensive and tailored risk solutions to a broader range of clients —and the benefits don’t stop there. 

“Analytics is powering ahead very quickly,” he stated, adding that this momentum is particularly exciting for “younger people in the industry looking to invest in their careers”.

Looking to the future, Shedden is optimistic about the potential for analytics to continue driving innovation in the industry. 

“For most of my career, I’ve been thinking about that nirvana where the risk is automatically directed to the right home.

“Now that we can combine data and information streams, our understanding of risk is getting closer and closer to that point every time, and that’s very exciting,” Shedden observed.

Paul Shedden is head of analytics for Risk Capital at Aon. He can be contacted at: paul.shedden@aon.com 

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