Aon, Floodbase, and Swiss Re have unveiled a parametric insurance product for hurricane-induced storm surges, leveraging meteorological data to assess risks. This solution can operate independently or alongside traditional policies, offering comprehensive coverage to businesses and public entities. With recent storms causing significant losses, this product aims to provide fast financial relief to those affected by storm surges in the U.S.
Aon, Floodbase, and Swiss Re have introduced a parametric insurance solution designed specifically for storm surge resulting from hurricanes. This innovative insurance product leverages meteorological data to accurately assess the risks associated with hurricane-driven storm surge. According to Cole Mayer, head of parametric solutions at Aon, the collaboration aims to enhance existing coverage for various stakeholders, including corporations, public entities, and reinsurers, who may face significant financial losses due to storm surge incidents.
The newly developed parametric insurance can operate independently or in combination with traditional insurance policies, ensuring clients receive extensive protection against storm surges impacting the United States. This offering is part of a comprehensive suite of products Aon provides to better assist clients in managing their liquidity and risk exposure effectively. Recent historical data indicates that storm surge and inland flooding contribute significantly to the losses incurred during hurricanes, as demonstrated by the catastrophes caused by Hurricanes Helene and Milton in 2024.
In November 2024, Aon’s Impact Forecasting and Catastrophe Management teams conducted a damage assessment in Florida, which highlighted the severe impact of storm surge on local communities. Martin Hotz, head of parametric natural catastrophe at Swiss Re Corporate Solutions, noted that parametric insurance offers a rapid and transparent means to address financial losses resulting from natural disasters. This solution is designed to align with the specific risk management strategies of corporations situated in vulnerable areas.
The report indicates that global losses from natural catastrophes exceeded $300 billion in the past year, reflecting a 14% increase over the long-term average. Moreover, the data illustrates that nations with substantial economic output generally experience higher concentrations of loss from disasters. Notably, even disasters with localized impacts, like Cyclone Chido in Mayotte, can result in damages significantly exceeding the affected region’s GDP.
The introduction of parametric insurance for storm surge reflects a growing recognition of the financial impact that natural catastrophes have on businesses and communities. Traditional insurance policies often take time to process claims following disasters, whereas parametric solutions provide quicker payouts based on predefined criteria tied to meteorological events. This method can prove beneficial for companies requiring immediate financial relief to mitigate losses associated with severe weather events, particularly hurricanes that generate storm surge damages.
The launch of parametric insurance by Aon, Floodbase, and Swiss Re marks a significant advancement in risk management for storm surge related to hurricanes. By utilizing meteorological data to determine payouts, this innovative solution enhances the ability of firms and communities to respond effectively to catastrophic weather events. The increased frequency and severity of such events highlight the importance of adaptable and swift financial solutions in safeguarding economic stability.
Original Source: www.dig-in.com
