The Story of Aon

A structural look at how an insurance broker's data accumulates into a compounding informational asset that no new entrant can replicate.

Introduction

Aon (AON) plc occupies a structural position in global commerce that few outside the insurance industry fully appreciate. As one of the world's largest insurance and reinsurance brokers, the firm sits between companies seeking to transfer risk and the carriers willing to absorb it. This intermediary role—placing hundreds of billions of dollars in premiums annually—generates something more durable than fees: proprietary data about how risk is priced, where losses occur, and which markets have capacity to absorb exposure.

The common view of insurance brokers frames them as middlemen—necessary but undifferentiated. This framing misses the structural reality. Every placement Aon executes generates information about risk pricing, loss experience, and carrier appetite that informs the next placement. Over decades and millions of transactions, this creates an informational asset that no new entrant can replicate without processing the same volume of business over the same span of time. The data does not sit in a database waiting to be copied. It is embedded in relationships, institutional knowledge, and analytical frameworks built through repeated interaction with risk.

Understanding Aon's arc reveals how certain intermediary businesses—capital-light, fee-based, and deeply embedded in client operations—develop structural advantages that look unremarkable from the outside but prove extraordinarily persistent once established.

The Long-Term Arc

Aon's development follows a pattern common to professional services firms: fragmented origins, gradual consolidation, and eventual transformation into an integrated platform. Each phase deepened the firm's structural position in ways that only become visible in retrospect.

How did Aon assemble itself through acquisition (1980s–1990s)?

Aon's modern history begins with Patrick Ryan, who built Combined Insurance Company of America and then systematically acquired insurance brokerage operations throughout the 1980s. The strategy was straightforward: purchase established brokerages with existing client relationships and carrier connections, then extract operational efficiencies from the combined entity. The Aon name was adopted in 1987—a Gaelic word meaning "oneness"—signaling the intent to integrate what had been assembled.

This assembly phase was less glamorous than it appears in hindsight. Each acquisition brought different systems, cultures, and client-handling approaches. The value was not in operational synergy alone but in the accumulation of client relationships and placement data across industries and geographies. A broker placing property insurance for manufacturers in the Midwest gained access to Aon's London market relationships for reinsurance. A benefits consultant in one city could draw on retirement actuarial expertise housed elsewhere. The network grew denser with each addition, even when integration remained incomplete.

How did Aon become a global advisory platform (2000s–2010s)?

The second phase saw Aon transform from a collection of brokerage offices into a globally coordinated advisory platform. The firm expanded aggressively into reinsurance brokerage, human capital consulting, and risk analytics. Geographic reach extended across Europe, Asia, and emerging markets. This was not mere expansion for revenue—each new market added data about regional risk characteristics, regulatory environments, and local carrier behavior that enriched the firm's global advisory capability.

A critical structural shift occurred during this period: the divestiture of underwriting operations. Aon exited the business of bearing insurance risk itself, choosing instead to focus entirely on the advisory and placement side. This made the firm capital-light and eliminated the conflict of interest inherent in both advising clients and competing with the carriers those clients needed. The choice echoed Visa's decision not to lend—by avoiding risk-bearing, Aon achieved stability and margin characteristics that underwriters could not match. Revenue became almost entirely fee-based, recurring, and disconnected from underwriting cycles.

What did the Aon United operating model change (2017–Present)?

The most structurally significant transformation came with the "Aon United" operating model, launched in earnest around 2017. Previously, Aon operated through distinct business lines—commercial risk, reinsurance, retirement, health—each with its own leadership, incentives, and client relationships. Aon United collapsed these divisions into a single integrated firm where any professional could bring the full platform to bear on a client's needs. A commercial risk broker working with a large manufacturer could seamlessly involve reinsurance, benefits, and data analytics colleagues without navigating internal boundaries.

This integration sounds like standard corporate reorganization. Structurally, it was far more consequential. It meant that a single client relationship could generate placement data, claims experience, benefits utilization patterns, and retirement funding analysis—all flowing into a unified analytical framework. The density of information per client relationship increased dramatically. Competitors operating in siloed business lines could match Aon in any single category but could not replicate the integrated view. The attempted merger with Willis Towers Watson in 2020–2021—ultimately blocked by the U.S. Department of Justice on antitrust grounds—revealed both the consolidation logic of the brokerage industry and the regulatory limits to how concentrated this intermediary layer can become.

Structural Patterns

Data Accumulation as Compounding Asset — Every placement generates proprietary information about risk pricing, loss trends, and carrier capacity. This data informs future placements, creating an informational advantage that deepens with volume and time. Unlike technology data moats, this information is embedded in relationships and institutional judgment, making it resistant to replication through technology alone.
Capital-Light, Fee-Based Economics — Aon earns fees and commissions for placing risk, not for bearing it. This structure requires minimal balance-sheet capital, generates high free cash flow, and insulates the firm from the underwriting cycles that periodically devastate carriers. Revenue recurs because insurance programs renew annually and clients rarely change brokers for complex risks.
Relationship Density and Switching Costs — Large commercial insurance programs involve intricate knowledge of a client's operations, loss history, and risk profile. Switching brokers means transferring this institutional knowledge—or losing it. The deeper the relationship, the higher the switching cost, creating client retention rates that often exceed 90%.
Scale Advantages in Carrier Access — Aon's volume of placements gives it negotiating leverage with carriers that smaller brokers cannot match. Carriers allocate capacity and offer favorable terms to brokers who deliver consistent, profitable premium volume. This creates a virtuous cycle: scale attracts better terms, better terms attract clients, more clients increase scale.
Integrated Platform as Structural Moat — The Aon United model means a single client relationship can span commercial risk, reinsurance, health, retirement, and data analytics. Competitors offering only one dimension of service compete at a structural disadvantage when clients value integrated solutions.
Regulatory Barrier to Further Consolidation — The DOJ's blocking of the Willis Towers Watson merger demonstrated that the brokerage oligopoly has reached a scale where further horizontal consolidation faces regulatory resistance. This paradoxically protects Aon's current position—the same forces that prevented Aon from growing larger also prevent others from assembling a comparable platform through acquisition.

Key Turning Points

The divestiture of underwriting operations was perhaps the most consequential structural decision in Aon's history. By choosing to advise on risk rather than bear it, the firm eliminated the balance-sheet volatility that characterizes insurance carriers. Catastrophic loss years that devastate underwriters have minimal direct impact on a pure broker. This choice also removed the conflict of interest that clouds broker-underwriter hybrids—clients could trust that Aon's placement recommendations served client interests rather than internal underwriting capacity needs. The decision sacrificed certain revenue streams but created a business with fundamentally different risk characteristics.

The Aon United restructuring represented a bet that integration would prove more valuable than specialization. Most professional services firms operate through distinct practice groups that protect their own revenue and client relationships. Aon's decision to dissolve these boundaries was organizationally difficult—it required changing compensation structures, leadership roles, and cultural norms established over decades. The structural payoff was a platform where cross-selling occurred naturally rather than through forced internal referrals, and where the firm's collective data could be leveraged across service lines rather than siloed within them.

The failed Willis Towers Watson merger, while often discussed as a regulatory setback, revealed structural truths about the brokerage industry. The DOJ's concern centered on concentration in specific market segments—particularly large commercial risk and reinsurance—where the combined entity would have controlled placement volumes large enough to distort carrier pricing and market access. This confirmed that Aon's scale had reached the point where its market position carried systemic significance. The firm's response—a $30 billion share repurchase program and accelerated organic investment—demonstrated that the consolidation thesis could be redirected toward capital return and internal capability building when external acquisition paths narrowed.

Risks and Fragilities

Aon's structural position depends on the continued complexity of risk transfer markets. If insurance purchasing were to become commoditized—standardized products placed through digital platforms without advisory input—the broker's role would diminish. This commoditization has already occurred in personal lines insurance, where consumers buy auto and home coverage directly from carriers or through simple comparison websites. The question is whether commercial and specialty lines, where risks are bespoke and placements require judgment, will follow the same path. So far, complexity has increased rather than decreased in commercial insurance, but the pattern is not guaranteed to persist.

Concentration risk runs in both directions. Aon depends on a relatively small number of large insurance and reinsurance carriers to absorb the risk its clients need placed. If carrier consolidation continues, the balance of power could shift from brokers to underwriters. A carrier large enough to dictate terms regardless of broker volume would erode the negotiating leverage that supports Aon's value proposition. The reinsurance market is particularly concentrated, with a handful of global reinsurers absorbing the majority of catastrophe and specialty risk worldwide.

Talent concentration presents an underappreciated fragility. Aon's data advantage is only partially embedded in systems—much of it resides in the judgment and relationships of experienced professionals who understand specific industries, risk classes, and carrier behaviors. These individuals are actively recruited by competitors, private equity-backed brokerage platforms, and insurtech ventures. While no single departure threatens the firm, sustained talent migration could erode the institutional knowledge that underpins the data moat. The shift to analytics and technology-driven placement may reduce this dependence over time, but the transition is incomplete.

What Investors Can Learn

Intermediary positions can be structurally durable — Businesses that sit between buyers and sellers in complex markets often accumulate informational advantages that deepen with time and volume, creating moats that are invisible on a balance sheet.
Choosing not to bear risk can be more valuable than bearing it — Aon's exit from underwriting sacrificed revenue but created a business with superior capital efficiency, margin stability, and through-cycle consistency.
Integration creates value that specialization cannot replicate — When a platform can serve multiple client needs through a single relationship, it generates data density and switching costs that point-solution competitors cannot match.
Regulatory limits can protect incumbents — The same antitrust constraints that prevent further consolidation also prevent new competitors from assembling comparable platforms through acquisition, freezing the competitive structure in place.
Recurring revenue in professional services compounds quietly — Annual renewal cycles, high retention rates, and fee-based economics can produce consistent compounding that attracts less attention than high-growth technology businesses but proves equally durable over decades.

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