A Revolutionary Approach to Modeling and Managing Risk

Peter Phillips drew from two decades’ worth of experience to bolster Aon’s PathWise Solutions Group and help fashion the best type of client experience

Peter Phillips, Aon Photo: Courtesy of PathWise Solutions Group LLC

When Peter Phillips was hired by Aon in 2008, he says he had one directive: develop a high-performance computing solution to manage complex processes. More than a decade later and now in the role of president and CEO of Aon’s PathWise Solutions Group, it’s fair to say that Phillips met his objective. More than that, however, he’s helped set up both Aon—a firm that has long recognized the huge importance of data and analytics in creating effective solutions—and its clients with financial risk management and analytical software that can evolve over time.

“PathWise Solutions helps companies do several things, including hedging risks and financial reporting, regulatory reporting, developing and pricing new products, as well as enterprise risk management,” he explains. “We’re three hundred to ten thousand times faster than the legacy software solutions in the marketplace. These companies have millions of policy holders and they have to do a lot of complicated and lengthy calculations. Sometimes it can take companies weeks to just complete one important calculation using these old systems. With our system, work can be done in a matter of hours or minutes. It’s a revolutionary approach to modeling and managing complex risks.”

It’s also something that Phillips, who has been designing, implementing, and managing effective variable annuity hedge programs and valuation solutions for insurance companies since 1998, could provide a unique insight into building. He has more than two decades’ worth of derivative trading, modeling, and risk management experience in the banking and insurance industries.

In addition to specialized software, the PathWise Solutions Group at Aon provides clients with investment advisory and consulting services. The software is an award-winning, integrated, high-performance computing business solution to model, price, value, report, and manage complex financial guarantee risk embedded in life insurance retirement products.

Although it’s not uncommon for companies to bandy terms such as “revolutionary” and “game-changing” about when discussing their own products, Phillips has had a decade not only to watch the PathWise Solutions formulate but also realize the incredible effect they’ve had on Aon’s client base. Although the technical aspects of the software play a large part in how dynamic it is—Phillips notes the software runs solely on Nvidia graphics processing units (GPUs), which provide the distinct speed advantage over other legacy systems running on central processing units (CPUs)—he also is quick to point out the successes are borne of an order from Aon to “do the right thing.”

“The biggest challenge in this industry is not taking shortcuts,” Phillips says. “From a design perspective, it’s often the case that people will cut corners to get a solution to the marketplace. We didn’t cut any. We had the privilege and opportunity to work for Aon, and they really instilled in me this notion of getting it right—it’s what our clients deserve, so we have to invest the time, effort, and hard work to do exactly that.”

Perhaps one of the strongest indicators of a job done well is the fact that the software platform was adopted by Kyobo Life Insurance Co. Ltd.—one of the three largest life insurance companies in South Korea —in 2017. The software replaced Kyobo’s previous patchwork of reserve valuation tools with an end-to-end, fully automated system to handle inforce conversion, assumption transformation, scenario generation, stochastic-on-stochastic calculations, and financial report generation. One of the main reasons this platform is now being adopted at an international level, Phillips notes, is that the clients drive how PathWise Solutions will perform instead of the reverse situation.

“I’ve talked about PathWise like it’s a finished product—it’s not at all. We continue to invest in the software and adapt and change it, and all the best ideas for change come from our clients.”

“The businesses are the experts—they know their business better than we do,” Phillips says. “It’s a different approach from a design perspective, and I’m very proud to see how all these pieces fit together. We never wanted to sacrifice on performance, flexibility, transparency, or control—and it’s working. Think about how good your solution must be to work in a country halfway around the world with a different culture and different language. You have to have a good product and great team for that to happen.”

Looking ahead, Phillips says he’s eager for more businesses to adopt PathWise Solutions as the system extends its focus to deep learning capabilities, which he says should enable clients to better understand their own data, control insight, and allow for better business decisions in the future. Without the input from his clients, however, that growth and increased understanding can’t happen, which is why Phillips doesn’t hesitate when asked about his favorite part of the job.

“I love working with clients and helping them with their toughest problems,” he says. “It’s a privilege, and I also get the opportunity to work with incredibly smart people, which enriches my knowledge base. I’m always very grateful for that. I’ve talked about PathWise like it’s a finished product—it’s not at all. We continue to invest in the software and adapt and change it, and all the best and toughest ideas for change come from our clients.”