Insurers financially prepared for growth but need innovation to offset secular trends

Sep 09, 2012, 05:15 ET from Aon Benfield

MONTE CARLO, Sept. 9, 2012 /PRNewswire/ -- Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc (NYSE: AON), today releases its 2012 Insurance Risk Study, a comprehensive review of risk, profitability and growth strategies, and other driving trends in the global insurance industry.


Now in its seventh edition, the Insurance Risk Study continues to provide detailed underwriting risk volatility benchmarks that are a valuable resource to chief risk officers, actuaries and other economic capital modeling professionals. Risk benchmarks are provided for 48 countries and key business lines, representing more than 90% of global premium. A comparison with the first edition shows that the risk parameters for U.S. lines have been stable over time, a testament to the robustness of the analysis. In addition to underwriting risk, the study provides important insight into U.S. reserve risk, and the correlation of macroeconomic factors related to insurance.

Motivated by surprise catastrophe losses in 2011, the new edition of the study analyses relevant drivers. It presents a series of Aon Benfield cartogram maps illustrating global demographic concentrations for population, GDP, wealth and insurance penetration. Further cartogram maps show global exposure to wind, earthquake and flood, highlighting their overlap with extreme concentrations of insured wealth. The study reveals that 80 percent of today's global insurance capacity serves only 15 percent of the earth's population and how this concentration drives global reinsurance pricing. It also explains how to use related robust risk management techniques as a supplement to traditional catastrophe models.

Profitability and growth strategies are explored for the 50 largest insurance markets across property, motor and liability. The study shows that global property premium has grown at 4.2 percent per year over the last five years, compared to 3.2 percent for motor premium and just 1.5 percent for liability lines. Further the study quantifies average loss ratio performance for each market and line. It reveals that just five countries, Brazil, Colombia, Indonesia, U.E.A. and Venezuela, have experienced both high growth and loss ratio outperformance across all three sectors, motor, property and liability. The study explains that Aon Benfield has built a more granular segmentation of the global insurance market and an effective four-part strategy to capture profitable growth. Recent opportunities in the Chinese motor market and in crop insurance are discussed in detail.

Other driving insurance trends are also explored by the study. It reveals that in 2011 the ratio of net written premium to Gross Domestic Product (GDP) for the U.S. insurance market, an indicator of overall premium adequacy, moved below three percent to its lowest level in more than 40 years, a sign of the continued soft pricing environment. Despite this historically low premium ratio, the study explains how declining frequencies across a number of U.S. lines of business have helped sustain profitability to a surprising degree. Describing the effect as "the disappearing risk", the study calls for greater analytically-supported risk taking innovation to drive industry growth over the coming decade – just as it has for the property catastrophe market since hurricane Andrew made landfall twenty years ago.

Stephen Mildenhall, CEO of Aon Benfield Analytics, said: "The Insurance Risk Study is based on many years of modeling innovation and actuarial research work from Aon Benfield's 500 person Analytics team. Its core parameters put the analysis of liability and non-catastrophic property lines on an equal footing with risks analyzed using catastrophe models. The study is part of our continual effort to expand the universe of effectively modelled risks as far as possible in order to maximize the use of insurance globally, and to create profitable growth opportunities for our clients and markets."

To view the full 2012 Insurance Risk Study report, please follow the link below:

About Aon Benfield

Aon Benfield, a division of Aon plc, is the world's leading reinsurance intermediary and full-service capital advisor. We empower our clients to better understand, manage and transfer risk through innovative solutions and personalized access to all forms of global reinsurance capital across treaty, facultative and capital markets. As a trusted advocate, we deliver local reach to the world's markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial and rating agency advisory. Through our professionals' expertise and experience, we advise clients in making optimal capital choices that will empower results and improve operational effectiveness for their business. With more than 80 offices in 50 countries, our worldwide client base has access to the broadest portfolio of integrated capital solutions and services. To learn how Aon Benfield helps empower results, please visit

About Aon

Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit for more information on Aon and to learn about Aon's global partnership and shirt sponsorship with Manchester United.

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