Broking giant Aon is embracing the Open Exposure Data (OED) Standard for the risk modelling of property reinsurance placements, working alongside leading reinsurers to test the hypothesis that this can enhance the sector’s operational efficiency.
Aon said that it is working with reinsurance firms RenaissanceRe, SCOR, Hannover Re and Swiss Re, when it announced its implementation of the Open Exposure Data (OED) Standard curated by Oasis.
The Open Exposure Data (OED) Standard has been around for more than five years, but it hasn’t had the adoption necessary for it to drive any industry efficiency.
But, with one of the largest reinsurance brokers in the world now implementing this, it means many property reinsurance programs will now come with standardised exposure data, which has broad ramifications.
The most interesting of the ramifications of this move, is not the standardisation of property reinsurance treaty data itself, but more the fact that through and as a result of this standardisation process the ability to efficiently trade property reinsurance risks could be enhanced.
While the fact a significant reinsurance market player is implementing it suggests market adoption could become widespread.
Even if open exposure data adoption doesn’t directly enhance the tradability of reinsurance risks, it should at least make the option of trading using marketplaces and digital platforms far more obvious to both cedents and reinsurers.
Not everyone wants standardisation and efforts to standardise have proven to be onerous, or failed to get the necessary adoption in the past.
But there are clear benefits, in how going through the process of standardising data for a specific subset of reinsurance, often considered the most commoditised and tradable anyway, in how this can change the way cedents and markets think about their risks and how they are traded.
Reinsurance broking is a very manual process still, adopting open standards could assist for the most commoditised market segments and perils.
For more complex reinsurance needs, it may not make risk more tradable, but it will likely further open market participants eyes to the possibility.
Because of this, it’s a meaningful step by Aon to embrace a standard that could ultimately drive greater democratisation of the understanding of risk, as well as its potential to be traded.
Dan Dick, executive managing director and global head of property analytics for Aon’s Reinsurance Solutions, commented, “Aon is proud to be part of this important initiative, which will serve to help reduce volatility in data assumptions, improve consistency in modelled output and increase the operational resilience of our clients and markets. This announcement exemplifies the ways in which our industry is making a positive impact in our communities and for our fellow citizens, by collaborating and focusing on critical issues where we can apply our energy and expertise to make a meaningful difference by informing better decisions.”
Ian Branagan, EVP and group chief risk officer at RenaissanceRe and co-chair of the Insurance Development Forum Risk Modelling Steering Group, ventured, “This is an outstanding example of continuing industry collaboration to drive the democratization of risk insight around the world. RenaissanceRe is incredibly proud of this initiative, and it is tangible evidence of our ESG goals of protecting communities by closing the protection gap and inducing positive societal change.”
Paul Nunn, head of Sustainable Insurance, SCOR, also said, “The success of this data standards initiative typifies the enormous drive and desire of our commercial and non-commercial partners to invoke meaningful and positive change through greatly improved ‘open’ and ‘easy’ exchange of critical risk information. No doubt this will greatly advance our common goal of helping to continuously advance societal resilience globally.”
Martin Bertogg, head of Cat Perils, Cyber and Geo at Swiss Re, stated, “We are proud to be among the industry players helping to unlock risk model data. Globally shared data formats are an important step to overcome barriers for consistency, processing efficiency and a transparent cat risk dialogue. Our industry has an urgent need to take out non-value adding friction from its production chain. By supporting OED, we take an important step to facilitate more insurance risk transfer.”
Jörg Steffensen, general manager, Group Risk Management at Hannover Re, added, “The new OED Standard enables not only a close interoperability between different risk stakeholders but also supports a wide field of open source projects in academia. Therefore it serves perfectly Hannover Re’s principle “beyond risk sharing – we team up to create opportunities.” The new standard is a major step forward in creating more resilience to natural catastrophes around the world and closing the protection gap.”
The OED Standard is a non-commercial venture designed to test and support the hypothesis that open data standards in risk modelling are more effective than proprietary and commercial standards, in terms of improving operational efficiency, reducing costs and increasing transparency and consumer choice.
Open data is not a requirement or prerequisite for trading, but it is a step towards the reinsurance market gaining more understanding of its exposure and the need for robust data, in a world that sees risk being trading more dynamically.