On Aon Podcast: Climate Impact on the Property and Casualty Market

On Aon Podcast: Climate Impact on the Property and Casualty Market
February 4, 2025 9 mins

On Aon Podcast: Climate Impact on the Property and Casualty Market

On Aon Podcast Hero Image

Aon experts discuss climate losses, the effects of court cases, and how analytics can help businesses make better decisions.

Key Takeaways
  1. In this episode, Aon experts recent climate trends and losses.
  2. Aon’s experts share property and casualty trends based on climate losses.
  3. Investing in analytics is a powerful way to mitigate these risks.

Intro:
Welcome to the On Aon Podcast, where we dive into some of the most pressing topics that businesses and organizations around the world are facing. Today, we’re looking at trends in the property and casualty market. Here’s today’s host, Joe Peiser.

Joe Peiser:
Hello, my name is Joe Peiser. I'm the global CEO of Aon Commercial Risk. In today's On Aon episode, we're talking with a couple of our risk capital leaders about property and casually risk trends that we're seeing for 2025. With record breaking losses last year, companies are looking for ways to mitigate financial and physical loss. And analytics and new financial instruments offer a path forward. These are topics that we're talking about at our Aon Property and Casualty Symposium in Orlando that's happening as we speak. With me today to discuss are two Aon experts in the field, Paul Shedden, Global Head of Aon Risk Capital Analytics, and Steve Hackenburg, our Property and Casualty Leader for Commercial Risk North America.

Thank you both for being with me today.

Steve Hackenburg:
Thanks, Joe. Happy to be here.

Paul Shedden:
Thanks, Joe.

Steve Hackenburg:
Great, Joe, thanks again. You mentioned in your opening, you know, the significant loss activity that's been happening really over the last five years in the property and casualty space. From a property perspective, you know, what's underpinning this loss activity is absolutely changes to the climate. Paul will talk more about that in a bit, but these climate changes are driving significant loss activity, not just in the traditional catastrophic perils of wind storm and earthquake, but also activities such as severe convective storms and wildfire. And the latter of these two perils traditionally have been viewed by the underwriting community as secondary perils, but given the frequency and severity of these events, they are now really being viewed as more primary perils by the underwriting community.

From a casualty perspective, what's underlying a lot of the changes in the loss activity is really changes to our tort process and the views that the public has in the courtroom around a tort activity and the willingness of the public to award significant awards in the jury box to the plaintiffs.

Joe Peiser:
Thank you, Steve. Of those things, climate for sure continues to be a pressing issue for our clients. And Aon's new Climate and Catastrophe Insight Report shows another record year for the hottest year and second highest losses from severe storms on record. Paul, can you tell us a bit more about that?

Paul Shedden:
Thanks, Joe, and thanks for mentioning the Cat Insights report, which hopefully all our clients are enjoying and using thoroughly and reading thoroughly. As you said, really two big highlights, perhaps. The first is second highest amount of SCS losses on record. And this really goes to support what Steve just said, that SCS and secondary perils in general are becoming really primary in everybody's thoughts. And this is a continuing trend from previous year. But perhaps more alarming, as you said, is this increase in annual average temperature. This has been widely reported on the news. We have, for the first time in history, breached the one and a half degree threshold that has been set. And that's a significant milestone. What's been less widely reported is that, in fact, every single one of the past 10 years has hit a new record, not consecutively, but each one of those in its own has hit a new record for warmest temperature as set by the World Meteorological Organization. So climate change is happening. And in addition to that, we know that global CO2 production has not yet peaked. We know that this will continue over a number of years. And therefore, the conclusion has to be that climate change is happening, warming is happening and the effects of that will be with us for decades to come.

What's difficult though is to figure out what type of effects those will be and how that in detail will affect the type of perils we have. We know that the models that are out there at the moment are fairly clear on predicting increases in frequency of flooding, of extreme heat, and indeed predicting increased meteorological conditions that tend to lead to severe storms.

But what is less clear from those models is whether or not they predict a higher frequency of tropical cyclones, for instance. They do predict that if a cyclone does happen that there will be increased rainfall associated with that cyclone, but they are silent really on the effect of the frequency. So lots of uncertainty out there and lots of confusion for clients. And that's where we really hope that some of our science and technology and own research can really help clients. Only in the last year we released our climate risk monitor which tries to do precisely that. So for each location around the globe we're trying to predict how that might be impacted by changing in the climate, changing in extreme heat, changes in freezes, changes in flood events as we go forward. So a complex world, a world which is changing significantly but a world which we hope that Aon can really help people to try and understand.

Joe Peiser:
Thank you Paul and thank you for bringing us to analytics, tools that can help our clients deal with all these issues we're talking about. Steve, how would you say the use of analytics have played a role in recent insurance renewals?

Steve Hackenburg:
We've talked a lot about the significant increase in property and casualty loss activity. And, you know, what's very interesting about that is a few things. Number one is the insurer results that are coming out for the fourth quarter and full year 2024 are proving to be very favorable.

The only takeaway that I have from that is we must work together with our clients to drive a harder bargain and achieve the best outcomes. And a big part of the answer to driving better outcomes is the investments in work that Paul and his team are doing, which is absolutely game changing. It's game changing in two ways. Number one, in that we're bringing much greater risk transparency and value at risk to our customers to help them truly understand what their loss potential is and the impact if those losses happen on their business. Secondarily, we're using that data and analytics from Paul's team to attract new capital into the space. Great examples of that are, know, and it's not just, you know, third-party non-insurance capital. It's also helping insurers develop new products and new ways of doing business, such as our parametric capabilities and as our Aon client treaty, which is a game-changing source of capacity for our customers. So, despite all the challenges, we're very optimistic of where we are and our ability to increasingly add wonderful value to our customers.

Joe Peiser:
That's great, Steve. Thank you. Surely sounds like there's some tools and programs that can help our clients in these difficult risk issues. So let's wrap up with one more question about analytics. Paul, tell us a bit more about how analytics are helping our clients and how they will continue to do so into the future.

Paul Shedden:
Yeah hopefully most people are aware that about a year and a half ago or a year and a quarter ago Aon announced a billion dollars investment into its digital and analytical capability. That announcement has led to a series of workflows inside Aon and a series of tools that we've been able to produce really quite rapidly over the course of the last year. Those are the tools that we call our analyzers, the property analyzer, the cyber analyzer, the DNO analyzer, the casualty analyzer.

But it's important to note the reason we've been able to do this so fast is one, because of the level of investment that we're doing, but it's also because of the really deep talent base that we've always had in analytics throughout the group. That talent base of actuaries, of natural peril scientists, of cyber specialists that have allowed us to take their knowledge and turn it into a digital experience, which is really what the analyzers are. It's a digital experience of that real depth of knowledge that we have in the organization.

Why I think clients are getting out of that is they're really enjoying the fact that they now have consistent and clear ways to understand their underlying risk and to understand the value of the transaction that is being proposed in front of them and compare that across many different transactions. And they're valuing that transparency that that brings and the insight that that brings. What can they expect in the future? I think they can expect more of what they've seen. All of these tools are really only the beginning. This is a continuous investment program. They're going to get better. We think they're already good, but they're going to get better. And you're going to see iterations, even at the Property and Casualty Symposium, of developments in those tools. They're also going to get broader. They're going to get wider geographical applicability, wider product applicability. So it's great what we've achieved so far, but what we will achieve over the next couple of years will really be a step change even further.

Joe Peiser:
Thank you, Paul. That's really exciting. And thank you for joining us today. And Steve, thank you for joining us today. That's our show. Thank you all for listening. In the coming months, we'll have more episodes on other risk capital topics. So until next time.

Outro:
Thanks for tuning in to the latest episode of On Aon. If you enjoyed this episode don’t forget to subscribe wherever you get your podcasts. And be sure to visit Aon.com to learn more about Aon.

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Terms of Use

The contents herein may not be reproduced, reused, reprinted or redistributed without the expressed written consent of Aon, unless otherwise authorized by Aon. To use information contained herein, please write to our team.

Aon's Better Being Podcast

Our Better Being podcast series, hosted by Aon Chief Wellbeing Officer Rachel Fellowes, explores wellbeing strategies and resilience. This season we cover human sustainability, kindness in the workplace, how to measure wellbeing, managing grief and more.

Aon Insights Series Asia

Expert Views on Today's Risk Capital and Human Capital Issues

Aon Insights Series Pacific

Expert Views on Today's Risk Capital and Human Capital Issues

Aon Insights Series UK

Expert Views on Today's Risk Capital and Human Capital Issues

Construction and Infrastructure

The construction industry is under pressure from interconnected risks and notable macroeconomic developments. Learn how your organization can benefit from construction insurance and risk management.

Cyber Labs

Stay in the loop on today's most pressing cyber security matters.

Cyber Resilience

Our Cyber Resilience collection gives you access to Aon’s latest insights on the evolving landscape of cyber threats and risk mitigation measures. Reach out to our experts to discuss how to make the right decisions to strengthen your organization’s cyber resilience.

Employee Wellbeing

Our Employee Wellbeing collection gives you access to the latest insights from Aon's human capital team. You can also reach out to the team at any time for assistance with your employee wellbeing needs.

Environmental, Social and Governance Insights

Explore Aon's latest environmental social and governance (ESG) insights.

Q4 2023 Global Insurance Market Insights

Our Global Insurance Market Insights highlight insurance market trends across pricing, capacity, underwriting, limits, deductibles and coverages.

Regional Results

How do the top risks on business leaders’ minds differ by region and how can these risks be mitigated? Explore the regional results to learn more.

Human Capital Analytics

Our Human Capital Analytics collection gives you access to the latest insights from Aon's human capital team. Contact us to learn how Aon’s analytics capabilities helps organizations make better workforce decisions.

Insights for HR

Explore our hand-picked insights for human resources professionals.

Workforce

Our Workforce Collection provides access to the latest insights from Aon’s Human Capital team on topics ranging from health and benefits, retirement and talent practices. You can reach out to our team at any time to learn how we can help address emerging workforce challenges.

Mergers and Acquisitions

Our Mergers and Acquisitions (M&A) collection gives you access to the latest insights from Aon's thought leaders to help dealmakers make better decisions. Explore our latest insights and reach out to the team at any time for assistance with transaction challenges and opportunities.

Navigating Volatility

How do businesses navigate their way through new forms of volatility and make decisions that protect and grow their organizations?

Parametric Insurance

Our Parametric Insurance Collection provides ways your organization can benefit from this simple, straightforward and fast-paying risk transfer solution. Reach out to learn how we can help you make better decisions to manage your catastrophe exposures and near-term volatility.

Pay Transparency and Equity

Our Pay Transparency and Equity collection gives you access to the latest insights from Aon's human capital team on topics ranging from pay equity to diversity, equity and inclusion. Contact us to learn how we can help your organization address these issues.

Property Risk Management

Forecasters are predicting an extremely active 2024 Atlantic hurricane season. Take measures to build resilience to mitigate risk for hurricane-prone properties.

Technology

Our Technology Collection provides access to the latest insights from Aon's thought leaders on navigating the evolving risks and opportunities of technology. Reach out to the team to learn how we can help you use technology to make better decisions for the future.

Top 10 Global Risks

Trade, technology, weather and workforce stability are the central forces in today’s risk landscape.

Trade

Our Trade Collection gives you access to the latest insights from Aon's thought leaders on navigating the evolving risks and opportunities for international business. Reach out to our team to understand how to make better decisions around macro trends and why they matter to businesses.

Weather

With a changing climate, organizations in all sectors will need to protect their people and physical assets, reduce their carbon footprint, and invest in new solutions to thrive. Our Weather Collection provides you with critical insights to be prepared.

Workforce Resilience

Our Workforce Resilience collection gives you access to the latest insights from Aon's Human Capital team. You can reach out to the team at any time for questions about how we can assess gaps and help build a more resilience workforce.

More Like This

View All
View All
Subscribe CTA Banner