Broker Aon announced today the launch of a shareholder class action exposure modelling service, responding to clients’ need for support to manage the challenging directors’ and officers’ (D&O) insurance market.

The D&O Decoder provides data and analytics on the probable level of securities litigation risk facing a company and the chances of the event occurring, the nature of their exposure and how it compares to their peers.

The model has crunched 250,000 simulated class actions based on data sourced from Australian historical representative lawsuits and traces the impact on a company’s share price and resulting claims.

Outputs of the model can be used by organisations to help inform the decision-making process with respect to proposed limit reductions or dropping the limit completely.

Aon Global Risk Consulting MD Jennifer Richards says the service “brings new insights to organisations, illuminating aspects of exposure that may not otherwise be known”.

“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,” Ms Richards said.

“This 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.”

Financial Services Group Director Eden Fletcher says Aon is responding to client need in developing the 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,” he said.