Brokerage giant Aon has launched a new directors and officers (D&O) exposure modelling service that offers unprecedented insight on shareholder class actions to help listed companies navigate the D&O market.
The new service, the D&O Decoder, provides data and analytics to an organisation's securities class action exposure and the probability of the event occurring, the nature of their exposure, and how their position compares to peers. It runs 250,000 simulated class actions based on data from Australian historical class actions and traces the impact to a company's share price and resulting claims.
Aon noted that class actions remain a critical concern for listed companies as they have been a significant factor in the rise of D&O insurance costs and coverage availability.
“The threat of D&O shareholder class action activity remains high in Australia, and for those companies potentially subjected to class actions, the rapid increase of insurers' premium expectations coupled with capacity restrictions has resulted in increased scrutiny and reductions in the amount of insurance procured to protect organisations from their exposure to securities class actions,” said Jennifer Richards, managing director of Aon Global Risk Consulting.
Organisations can use the new model's output to help inform the decision-making process with respect to proposed limit reductions or dropping the limit completely.
Richards explained that the additional scrutiny in the D&O market over limit decisions has created a surge in demand for analytics beyond what is typically available.
“Sophisticated modelling is key to addressing and exposing the level of risk of a shareholder class action and the resulting impact on availability of D&O insurance,” she continued. “The Aon D&O Decoder brings new insights to organisations, illuminating aspects of exposure that may not otherwise be known.”
Eden Fletcher, the director for Financial Services Group at Aon, added: “Aon is responding to client need in developing this modelling as more and more organisations seek out data and analytics to better understand their class action risk and exposure.
“Our model goes much further than the traditional benchmarking or modelling currently available in the Australian market to help organisations navigate through these uncertain times and provide greater surety on the risk exposure of shareholder class actions and resulting financial impact.”