Interview: Dean Roberts, Aon Benfield


21.10.14 TUESDAY


Capital models drive negotiations


The looming implementation of Solvency II is driving many re/insurers to update and invest in their internal capital models—meaning these will play a more important role than ever in renewals negotiations as companies get a better handle on how individual deals will affect their wider businesses, as Dean Roberts explains.


G reater certainty around the implementation of Solvency II and what


it will mean for re/insurers has driven more companies to invest in internal capital models to help them better understand their businesses, said Dean Roberts, the business development executive for Aon Benfield’s ReMetrica team. One of the consequences of this dynamic,


Roberts said, is much greater interest in ReMetrica, Aon Benfield’s risk and capital modelling software. “Companies are interested in switching to


it and our existing clients are keen to ensure they are using it to its full potential,” Roberts said. “We have definitely seen more enquiries since the implementation of Solvency II was finalised. People are now reviewing their existing models and systems and are willing to invest to ensure they are ready.” He notes that one new client—a UK general


insurer that has invested in ReMetrica—said it did so for three specific reasons: it was faster at processing capital models, the cost of implementation was lower and the support from Aon Benfield was “excellent with answers being given quickly”. A shift by the industry towards using such


models has been underway for some time. In fact, ReMetrica was launched some 15 years ago, but Roberts believes this has accelerated in recent years to the point that both buyers and sellers of reinsurers use such tools in an extremely sophisticated way and they become pivotal in negotiations during the renewals season. He stresses that such models can be used


to take into account the many moving parts of companies—a great deal of work is done by the many different departments within re/insurers to get to a point these models can provide multiple scenarios around risk-management and reinsurance purchasing so that its users have a clear understanding of how different types of deals will affect their wider businesses. “Ahead of the renewals, each class


Dean Roberts


“Using cloud computing means that clients can use elements of its capability on an almost ‘on-demand’ basis, paying for certain hardware only when they need it.”


underwriter and the finance directors will be submitting business plans and running these plus many different scenarios through the models well in advance of the 1/1 renewals,” he said. “This information can then be taken forward and used in renewal negotiations. It is especially valuable in relation to catastrophe pricing, which is data-reliant and capital-intensive.” He said the models allow buyers a clear


understanding of how the deals they do and the


reinsurance structures they agree will


affect their wider companies’ risk profiles, profitability and strategy. They can also be used to test numerous loss scenarios to see what the overall affect would be on the business. For reinsurers, the tool provides similar


information while also allowing them a firm handle on their accumulation risks and wider exposures


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across portfolios. An integrated tool called PACE allows reinsurers to quickly run an aggregation and roll up report to understand the marginal impact of individual programmes, Roberts said. As more companies consider using the


ReMetrica platform, Aon Benfield has also invested in improving the software and making it more effecient to use. It now leverages the power of cloud


computing for elements of its capability, which means that clients do not have to invest as much in internal infrastructure to keep the model running in-house at all times. This makes using it more cost-efficient. “We realised that while there are certain


times of the year when clients use 100 percent of its capabilities, there are also long periods of the year when they may only be using 30 percent,” Roberts said. “Using cloud computing means that clients can use elements of its capability on an almost ‘on-demand’ basis, paying for certain hardware only when they need it while avoiding the investment in infrastructure required to run the model. “That makes a big difference to the all-in


cost of using ReMetrica and has been very popular with clients.” Aon Benfield will also shortly launch Version


7 of ReMetrica, which has been enhanced in a number of ways. Roberts said it has been built using “brand new state of the art cutting-edge technology” and will be significantly faster than previous models. It has been designed to process information using Graphics Processing Units (GPUs) as opposed to Central Processing Units (CPUs). “This will make it much faster than previous


versions. We have also invested heavily in the user experience and the interface to make it more client-friendly,” Roberts said. n


Dean Roberts is a business development executive for Aon Benfield’s ReMetrica team. He can be contacted at: dean.roberts@aonbenfield.com


DAY 2: Tuesday October 21 2014 | BADEN-BADEN TODAY | 3


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