Why Aon and Willis Towers Watson combined are a stronger firm

07 October 2020 Consultancy.uk 6 min. read

As the deal to create the world’s largest global insurance and investment professional services firm closes, Aon and Willis Towers Watson have started promoting the benefits the newly merged firm will offer. The 95,000-strong firm will command revenue of around $20 billion, and have capabilities which can combine data, analytics and technology to create more powerful predictive models for clients.

The merger between Aon and Willis Towers Watson will create the market’s largest HR consulting firm and insurance broker. Having received shareholder approval, the deal – which is the largest ever in the landscape – sees Aon buy rival Willis Towers Watson for $30 billion in an all-stock transaction.

As both parties expect the transaction to close at the turn of the year, the resulting company will be incorporated in Ireland and operate as Aon, with the Willis Towers Watson brand retired. Aon will maintain operating headquarters in London, but its circa 50,000 employees and $11 billion revenue will be joined by Willis Towers Watson’s 45,000 staff and $9 billion revenue.

Why Aon and Willis Towers Watson combined are a stronger firm

According to Aon CEO Greg Case and Willis Towers Watson CEO John Haley, the “once-in-a-generation combination” will help both firms establish a company which can meet the rapidly changing needs of clients.

Speaking via an article on Willis Towers Watson’s website, Case and Haley said, “Clients are justifiably focused on the socioeconomic impact of the pandemic, but they are also increasingly aware of other challenges like climate change, supply chain disruption, and the growing health-wealth gap, to name just a few… We have to accelerate our evolution and strengthen our client-serving capabilities in order to meet these new challenges… On day one, the combination of Aon and Willis Towers Watson will enable us to create new, more powerful predictive models and develop solutions at a pace not previously possible.”

The pair see four initial categories of client need that the merger can have a tangible long-term impact on. These areas focus on accessing the opportunities available in this complex environment, and consist of navigating new forms of volatility; building a resilient workforce; rethinking access to capital; and addressing the underserved.

Adapting to volatility

Case and Haley explained, “We live in an interconnected world, driven by technology and challenged by both traditional and emerging forms of risks like climate change, pandemic, cyber threats and the growing health-wealth gap. This increased volatility challenges all aspects of our global economy and society. That is why it is an imperative to expand traditional risk management to address classes of risks – long-tail in nature – that are increasingly relevant but lack comprehensive solutions that address risk mitigation, incident response and compensation for loss.”

The combined organisation will be in a better position to help companies prevent, respond to and recover from risks in a way that has previously been unmanageable. Predictive models the firm will deploy will need data and analytics, and forward-looking algorithms to create better predictive models for the emergence of longer-term crises – such as pandemics – but together the firms will be able to close that gap to help clients better understand the nature of emerging severe risks, and reduce their cost by providing new insights into their frequency and severity.

Workforce resilience

The last decade has seen a fundamental shift in where, how and when work gets done. On top of the Covid-19 pandemic having seen home-working solutions rolled out at double-speed, automation, artificial intelligence and the expansion of alternative work arrangements are trends challenging companies to rethink their talent strategies.

“The combination of our two firms will provide better options for employers and workers so that they can build more resilient workforces by addressing the considerable gap between traditional workplace benefits and rewards and the evolving nature of work while also enabling them to hire, retain and reward employees with solutions that enable them to grow and develop and support their overall wellbeing,” stated the Willis Towers Watson professionals.

Access to capital

Continuing, Case and Haley said, “While accessing capital has always been critical for organizations and the health of economies, on-going changes and market forces are expanding the very definition of capital to go beyond the traditional focus on hard assets to now include a focus on the value of intangible assets like IP. These non-traditional forms of capital are increasingly critical to economic growth and organisational performance. Nearly 85% of the value of the S&P 500 is represented by intangible assets. Unfortunately, the tools to effectively manage these sources of value have not kept pace with that shift.”

In order to help clients understand, manage and protect the combined value of their traditional and intangible assets, the combination of Aon and Willis Towers Watson will aim to use its analytics and deep data set to build trackers for specific classes of risk, establishing special purpose financial vehicles and improving the value chain for sourcing capital by using leader and follower capacity that industrialise and scale solutions. Underscoring both the value to an organisation and the inherent associated risks, Aon has already established an intellectual property liability underwriting platform on this basis.

Serving underserved markets

Finally, as many industry sectors face highly specific challenges that lack equally specific solutions, Aon and Willis Towers Watson will help firms look to service ignored previously underserved lines of work. For example, while the Covid-19 pandemic heightens the importance of front-line workers – medical and nonmedical – there is a lack of solutions that support critical non-emergency medical transportation companies, due to them being unable to obtain the appropriate coverage required to provide their essential services.

“As a combined firm,” Case and Haley concluded, “our advanced analytical capabilities will allow us to create new forward-looking models that unlock capital and create a market to meet these specialised needs. These combined tools and services, along with our continued investment in innovation, will enable a rich ecosystem that will provide a marketplace of high-quality solutions and capacity.”