Aon Introduces Parametric Storm Surge Insurance Solution for Hurricane Risks
Aon plc has launched a parametric insurance solution to mitigate commercial losses from hurricane-related storm surges in the U.S. This collaboration with Floodbase and Swiss Re addresses gaps in traditional insurance, particularly concerning high deductibles and exclusions. The product allows for customizable payouts based on water heights, facilitating quicker financial recovery for affected entities during catastrophic weather events.
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 has been developed in collaboration with Floodbase, a parametric flood insurance provider, and Swiss Re Corporate Solutions. It seeks to address protection gaps often found in traditional insurance policies, which may impose high deductibles or significant exclusions for storm surge risks.
The urgency for such solutions is underscored by Aon’s 2025 Climate and Catastrophe Insight report, which identifies Hurricane Helene as the most catastrophic natural event of 2024, incurring approximately $75 billion in economic losses related to flooding. Insurers faced around $37.5 billion in claims from hurricanes Helene and Milton, demonstrating the financial impact of such calamities. Notably, storm surge may constitute over a third of total loss costs in severe hurricane events.
Cole Meyer, who heads Aon’s parametric solutions, highlighted that storm surge significantly drives losses for corporations, public entities, and reinsurers. Consequently, Aon has developed this collaborative parametric solution to enhance existing coverage levels, aiming for more comprehensive protection. Parametric insurance can function as an independent product or complement existing policies, thus providing more adaptability for policyholders.
Unlike traditional indemnity insurance, which is based on settlement after damages, this parametric solution operates using water height metrics. Policyholders can determine their desired payout for specific storm surge levels, with rates adjusted accordingly. Claims can be utilized for any financial losses resulting from the event, supported by various meteorological data sources.
Martin Hotz, from Swiss Re Corporate Solutions, stated, “Parametric insurance provides a fast, flexible and transparent way to cover financial losses caused by natural catastrophes.” His assertion emphasizes the effectiveness of this new approach in providing rapid payouts, aiding organizations in managing risks in vulnerable areas more effectively.
The introduction of parametric insurance solutions represents an innovative approach to addressing the financial repercussions of natural disasters, particularly hurricanes. Traditional insurance models often leave significant gaps in coverage, especially regarding storm surge, an often-overlooked contributor to overall damages. This parametric solution is crafted to specifically address these shortcomings and to support businesses with rapid and reliable financial compensation following catastrophic weather events.
In conclusion, the new parametric storm surge insurance solution developed by Aon, Floodbase, and Swiss Re signifies a critical advancement in risk management for commercial entities in hurricane-prone areas. By bridging coverage gaps in traditional insurance and providing a flexible payout structure, this innovative approach allows affected businesses to react swiftly to financial losses caused by significant storm events like hurricanes. The strategic collaboration enhances existing protections and addresses the evolving needs of the insurance landscape.
Original Source: www.insurancejournal.com
