Aon plc has launched a new parametric insurance solution to mitigate commercial losses from hurricane storm surges in the U.S. Developed in partnership with Floodbase and Swiss Re, the solution aims to bridge gaps in traditional insurance, addressing high deductibles and significant exclusions. The parametric product provides fast and flexible financial recovery based on water height thresholds, offering a tailored approach to risk management amid increasing natural disaster occurrences.
Aon plc recently introduced a parametric insurance solution aimed at mitigating commercial losses from hurricane-related storm surges along the U.S. coastline. This product was developed in collaboration with Floodbase, a parametric flood insurance provider, and Swiss Re Corporate Solutions. It is designed to fill protection gaps in traditional insurance that often include high deductibles and extensive exclusions for storm surge risks.
The launch of this solution is timely, particularly following findings from Aon’s 2025 Climate and Catastrophe Insight report, which identified Hurricane Helene as the most significant natural disaster of 2024, leading to an estimated economic loss of $75 billion due to extensive flooding. Insurers faced around $37.5 billion in claims attributed to damages from hurricanes Helene and Milton, underscoring the financial risks associated with such events.
A substantial portion of hurricane-related losses often stems from storm surge damage, which can constitute more than one-third of the total costs incurred. Cole Meyer, head of Aon’s parametric solutions, emphasized the critical nature of storm surge as a loss driver for corporations and public entities, motivating the development of this parametric insurance solution to enhance current coverage levels.
Unlike traditional indemnity insurance, this parametric product operates based on water height, allowing policyholders to determine their payout levels for specific storm surge heights. This feature enables quick financial recovery following such natural disasters, as the proceeds can be applied to any resulting financial losses. Various meteorological data sources are incorporated to evaluate hurricane-related storm surge levels effectively.
Martin Hotz, who heads parametric natural catastrophe at Swiss Re Corporate Solutions, stated, “Parametric insurance provides a fast, flexible and transparent way to cover financial losses caused by natural catastrophes.” He highlighted that this innovative product offers rapid coverage tailored to meet the unique risk management strategies of corporations in vulnerable areas.
The introduction of parametric insurance solutions represents a significant advancement in the realm of risk management for businesses facing natural disasters. Traditional insurance products often fall short when addressing specific risks such as storm surges, as they may impose high deductibles or relevant exclusions. The collaboration between Aon, Floodbase, and Swiss Re aims to enhance coverage capabilities and respond more effectively to the financial burdens imposed by hurricanes and related flooding events.
Aon’s collaboration with Floodbase and Swiss Re marks a pivotal step toward providing businesses with enhanced protection against hurricane-related storm surges through parametric insurance. This innovative solution fills coverage gaps often left by traditional insurance policies and enables rapid financial recovery for businesses affected by natural disasters. Furthermore, the employment of precise meteorological data signifies a move towards more tailored risk management strategies suited to the specific needs of diverse entities.
Original Source: www.insurancejournal.com
