Aon Launches Parametric Insurance for Hurricane-Related Storm Surges

Aon plc has launched a parametric insurance solution to mitigate hurricane storm surge losses in the U.S. Developed with Floodbase and Swiss Re, this product addresses gaps in traditional insurance policies. Aon’s report highlights significant financial impacts from hurricanes, underscoring the need for prompt payment mechanisms to enhance corporations’ security against such risks.

Aon plc has unveiled a new parametric insurance solution aimed at mitigating commercial losses from hurricane-induced storm surges along the U.S. coastline. This innovative product, developed in collaboration with Floodbase, a specialist in parametric flood insurance, and Swiss Re Corporate Solutions, seeks to fill the substantial protection gaps found in traditional insurance policies, which often impose high deductibles or contain significant exclusions regarding storm surge risks.

The 2025 Climate and Catastrophe Insight report by Aon indicates that Hurricane Helene was the most catastrophic natural disaster of 2024, leading to estimated economic losses of $75 billion, primarily from inland and coastal flooding in the U.S. Insurers faced about $37.5 billion in claims linked to Hurricanes Helene and Milton, including payments from the National Flood Insurance Program.

Storm surge damage can represent over one-third of the total losses incurred during certain hurricane events. Cole Meyer, who heads Aon’s parametric solutions, noted that their data reveals storm surge as a crucial factor driving losses for corporations, public entities, and (re)insurers. Hence, they created this collaborative parametric solution to enhance existing coverage levels.

Parametric insurance may function as an independent product or complement other insurance policies. Unlike traditional indemnity insurance, parametric solutions are premised on water height, allowing policyholders to determine desired pay-out levels corresponding to specific storm surge levels, with calculated rates. Proceeds from such policies can address any financial losses incurred due to the event, supported by various meteorological data sources.

Martin Hotz, head of parametric natural catastrophe solutions at Swiss Re Corporate Solutions, stated, “Parametric insurance provides a fast, flexible, and transparent way to cover financial losses caused by natural catastrophes.” He emphasized that this pioneering solution would assist corporations in vulnerable regions with prompt pay-out options tailored to their risk management strategies.

The introduction of parametric insurance represents a shift from conventional insurance methods, responding to the evolving needs of businesses exposed to hurricane risks. The collaboration between Aon, Floodbase, and Swiss Re is designed to enhance financial resilience against natural disasters, particularly by providing coverage for storm surges, a significant and often underinsured risk. This initiative reflects the growing recognition of the importance of rapid financial response mechanisms in the wake of catastrophic events, especially in light of increasing climate-related threats.

Aon plc’s new parametric insurance solution aims to alleviate financial losses from hurricane-related storm surges along the U.S. coast. This innovative product addresses gaps found in traditional insurance and underscores the critical risk posed by storm surges. The collaboration with Floodbase and Swiss Re demonstrates a proactive approach to managing and mitigating risk in a changing climate, ultimately benefiting corporations and public entities. The assurance of prompt pay-outs enhances financial security for those affected by natural disasters.

Original Source: www.insurancejournal.com