Aon Launches Risk Financing Decision Platform

June 16, 2009

Aon Global Risk Consulting announced that it is launching its Risk Financing Decision Platform (RFDP) in Europe “to help save companies up to 15 percent off their total cost of risk and justify the risk financing program to the board.”

Aon said the process “will help businesses decide how much risk to retain – through deductibles or captives, for example – and how much to transfer to the insurance markets – to optimize the risk financing spend in the long term.”

The bulletin described the features of the RFDP as a “three-pronged approach,” which links the following:
— actuarial risk modeling – creating loss models for traditional insurance risks (EL, property and political risks etc) and enterprise risks (supply chain, employees, cyber etc);
— financial analysis – looking into a company’s financial plans to grasp how much risk the company is able to retain and to see how loss scenarios can impact a company’s key performance measures;
— program design and stress testing – reviewing risk transfer strategies through modeling of the current program and alternative options, which results in cost of risk savings on a like for like basis.

After the analysis is completed, “companies can view how the total cost of risk could be split differently with cost/benefit analysis for each of the potential insurance options. At the same time, the platform produces a report that can be shared with board to justify insurance decisions and keep in line with corporate governance.”

Martin Massey, head of business development at Aon Global Risk Consulting, noted: “”We’ve used the platform for over 50 clients in the US and on average, by linking actuarial modeling to company financials and the risk transfer marketplace, we’re seeing our clients save between 5-15 percent on their total cost of risk.

“The RFDP process helps support the risk manager both in providing a framework to evaluate strategic alternatives but also in justifying to its stakeholders that its risk financing program adds value and is cost effective.”

Source: Aon – http://www.aon.com

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