Aon Benfield has launched the PACE platform to help reinsurers monitor the aggregate catastrophe exposure across their portfolios. By having an enhanced understanding of their exposures, the new tool will enable reinsurers to make better use of their capital and in turn offer more competitive quotes and potentially new lines of business to insurers.
With record levels of capital in the market, reinsurers are exploring new business opportunities that match their risk appetite. In response, Aon Benfield has developed PACE (Portfolio Accumulation for Control & Evaluation) to enable reinsurers to evaluate the impact of individual programmes against their existing portfolio. This determines how much capital a programme consumes in relation to the rest of the portfolio and therefore how much of that business a reinsurer can afford to write.
It helps them to understand their overall accumulation of risks by highlighting which regions and perils are most exposed and perform “what-if” analyses. For example: How would a portfolio be affected if large hurricanes occurred more frequently than the catastrophe model suggests? What if a reinsurer increased its share of European earthquake business by 10%?
Reinsurers need to optimise their business to consequently improve their return on equity which allows them to provide attractive quotes in an increasingly competitive market. PACE combines sophisticated logic behind the scenes with a simple non-technical interface. It has been designed specifically for underwriters to quickly and easily enhance their decision-making and financial planning when taking on new risks. It also enables reinsurers to set a consistent way of pricing across the firm.
MS Frontier Re has been one of the companies involved in the testing phase and has now licensed PACE to gain a greater understanding of its exposure by region and peril. Catherine Farnworth, Head of Enterprise Risk Management at MS Frontier Re, commented: “Giving our underwriters access to the most valuable data in a short time-frame enables them to make better decisions about employing our capital in the optimum way.”
Adrian McFarlane, PACE’s Data Architect at Aon Benfield