Aon plc has launched a new parametric insurance solution to mitigate commercial losses from hurricane-related storm surge in the U.S. Developed with Floodbase and Swiss Re, this product addresses protection gaps in traditional policies. Recent data highlights the significant financial risks posed by storm surges, justifying the need for this innovative solution that offers flexibility and rapid payouts.
Aon plc has introduced a novel parametric insurance solution aimed at mitigating commercial losses caused by hurricane-related storm surge along the U.S. coast. This product, developed in collaboration with Floodbase and Swiss Re Corporate Solutions, seeks to fill protection gaps in traditional insurance policies that often present high deductibles and significant exclusions regarding storm surge risk.
According to Aon’s 2025 Climate and Catastrophe Insight report, Hurricane Helene was the most destructive natural disaster in 2024, inflicting approximately $75 billion in economic losses, primarily due to flooding along U.S. coasts and inland areas. Insurers faced around $37.5 billion in claims as a result of hurricane damage, which included payouts from the National Flood Insurance Program.
Notably, for certain hurricane incidents, damages from storm surge can exceed one-third of total losses. Cole Meyer, Aon’s head of parametric solutions, emphasized the significance of storm surge as a loss driver for corporate entities, public institutions, and (re)insurers, leading to the development of this innovative parametric solution designed to enhance existing coverage levels.
Parametric insurance can function as a standalone product or complement other insurance options. Unlike traditional indemnity insurance, parametric solutions are based on specific water height measurements, allowing policyholders to choose the payout level they require for given storm surge conditions, with the payout rate accordingly calculated. Various meteorological data sources are utilized to assess storm surge inundation linked to hurricanes.
Martin Hotz, the head of parametric natural catastrophe at Swiss Re Corporate Solutions, noted, “Parametric insurance provides a fast, flexible and transparent way to cover financial losses caused by natural catastrophes.” He affirmed that this innovative coverage can effectively support corporations located in risk-prone areas by providing rapidly deployed financial assistance tailored to their risk management strategies.
The introduction of a parametric insurance solution addresses prevalent challenges within traditional insurance frameworks, particularly concerning hurricanes and associated storm surges along the U.S. coast. Given the increasing frequency and severity of natural disasters, businesses seek effective insurance mechanisms to ensure adequate financial protection against catastrophic events. Therefore, understanding the interplay between parametric insurance, traditional indemnity policies, and the unique metrics surrounding storm surge risk is critical for stakeholders.
In conclusion, the launch of Aon’s parametric insurance solution represents a significant advancement in risk management for hurricane-related storm surge. By addressing gaps in traditional insurance policies and allowing for tailored payout options, this product serves to better protect businesses in vulnerable coastal regions. The collaboration with Floodbase and Swiss Re enhances its credibility and effectiveness in reducing financial losses caused by natural catastrophes.
Original Source: www.insurancejournal.com
