2009-06-18

By Editor, CIR

Companies can save up to 15% off their total cost of risk through a risk decision platform being launched in Europe, claims Aon Global Risk Consulting.

The group, which already offers its Risk Financing Decision Platform (RFDP) to companies in the US, says the process helps businesses decide how much risk to retain -- for example through deductibles or captives -- and how much to transfer to the insurance markets. Companies can achieve efficiencies in their risk financing spend.

Aon adds that RFDP uses a three-pronged approach, linking:

Actuarial risk modelling: creating loss models for traditional insurance risks (such as Employers' Liability, property and political risks) and enterprise risks (such as supply chain, employees and cyber);

Financial analysis: looking into a company's financial plan' 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;

Programme design and stress testing: reviewing risk transfer strategies through modelling of the current programme and alternative options, which results in cost of risk savings on a like for like basis.

Following the analysis, companies can view how the total cost of risk could be split differently with cost/benefit analysis for each of the potential insurance options. The platform also produces a report that can be shared with the board to justify insurance decisions and comply with corporate governance.

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

"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 programme adds value and is cost effective."

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