Broking giant Aon aims to, through its strategic plan, scale more risk capital for its clients, bringing more of the capital markets into its offering with an ambition to add more resources to its insurance-linked securities (ILS) business and highlighting $3 billion of parametric limits bound.During the Aon investor day today, the first in nearly twenty years, senior executives from the company highlighted a desire to scale up facilities, build on its capital markets and ILS business, while highlighting the innovation and opportunity in parametric risk transfer.Aon CEO Greg Case explained that data, analytics, innovation and more capital are all key to the company achieving the strategy it has laid out at the event.Seeing the insurance market as around $5 trillion in size, Aon believes one opportunity is in optimising this, to make use of capital more efficient and solve more client problems.

But just as important is unlocking more of the estimated $250 trillion global capital pool and enabling that to participate and scale up available risk capital to solve client problems.Talking about Aon’s answer to the call for more risk capital, Case said that the strategy is to achieve a “straight up massive tour de force force effort around acceleration, around scale.” Case explained, “It is industrial strength execution.It is industrial strength execution to drive an outcome on behalf of clients, that we know is going to make a difference.” “We have to move money out of the $250 trillion into the $5 trillion.

To make this work, you’ve got to have capital movement.” Andy Marcel, CEO of Global Solutions at Aon, , provided more insights into the need for capital, as well as examples of innovative ways Aon is helping clients to access new capital sources.He began with the facilities Aon has become well-know for, saying, “In capital solutions.What is that? There’s a couple of things.

One, we continue to facilitise our business, such as the creation of the Aon Client Treaty, which is in London, 10 years in the making.“What we’re trying to do here with other facilities, like that, is to create as much automatic capacity to serve our clients as we can, in the most efficient way, drawing in capital.” Marcel moved on to discuss parametrics, an area of growth for Aon like most other brokers, “Equally important is our parametric.We have connected globally, under Joe Peiser, our parametric business around the world.

“So, if you think back to two or three years ago, we probably did 20 to 30 parametric transactions for corporate clients.Now we’re doing in excess of 100 plus, and it’s accelerating.“And in the trailing 12 months, I think we’ve bound $3 billion of limit in that category.

So that’s an important area for us.” Which is a helpful statistic for those tracking parametric risk transfer market growth, with one of the largest brokers now binding $3 billion of limit for risks linked to parametric triggers in a year.Moving on to Aon’s insurance-linked securities practice, that sits under the Aon Securities unit.Marcel highlighted this as an area for continued investment and a business unit likely to grow.

“In insurance linked securities, so think cat bonds, where we’ve been the market leader for some time, demand and our position in that is accelerating all the time.So we’re going to put more resources into that category,” Marcel explained.Later in his presentation at the Aon investor day, Marcel highlighted one example that brings together some of this, in being a parametric risk transfer instrument, funded by the capital markets, that was designed to support a human capital need.

“We have a client in California that was asking us the question about their talent resiliency.Post an extreme event, in this case, earthquake, what was their vulnerability to their talent, and how would they get back to operations, business resiliency,” Marcel explained.“That was actually brought to us by our talent colleagues, and it came to our commercial risk, and reinsurance colleagues for a solution.

So we mapped out and geo-coded where all their talent was, or what the aggregation of that population was in particular earthquake zones, describe how much limit you needed to buy to offset that.“We brought a parametric bond and so when an event happens that triggers that bond, cash will be immediately paid out and then distributed by the client to its employees in the form of an employee benefit, getting them back on their feet, back to work.It helps business resiliency, it helps employee engagement, it was fantastic.

“But when you really think about what went on there, you had Aon in operation.You had an opportunity delivered by another part of the firm, by talent to risk capital, engaging reinsurance, modelling, placing the business into the parametric market, into the bond market.“And who’s investing in the bond market, ILS funds, pension funds, hedge funds.

This is very similar to what’s been happening in the cat bond market, where we lead, where billions of dollars has been flowing into that market over time, and it’s accelerating.” Marcel also said, “Think back to what Greg said about the $250 trillion of capital that’s out there, that we want to bring into the business.We want to bring into the business to solve our clients needs.That’s what we need to do to break the trend, and that’s what we’re doing, real examples, and we’re doing this every day.”.

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