Aon Unveils Parametric Insurance Solution for Hurricane Storm Surges

Aon has launched a parametric insurance solution to mitigate commercial losses from hurricane storm surges in the U.S. The product, developed with Floodbase and Swiss Re, directly addresses limitations of traditional insurance policies. It allows flexibility in payouts based on storm surge metrics, enhancing protection for businesses against significant financial losses from hurricanes.

Aon plc has introduced a new parametric insurance solution aimed at alleviating commercial losses caused by hurricane-related storm surge in the United States. Developed in collaboration with Floodbase, a provider of parametric flood insurance, and Swiss Re Corporate Solutions, this innovative product addresses gaps often found in traditional insurance policies. Such gaps frequently involve high deductibles or significant exclusions regarding storm surge risk, according to Aon’s insights.

The necessity for such solutions is underscored by Aon’s 2025 Climate and Catastrophe Insight report, which identified Hurricane Helene as the most impactful natural disaster event of 2024, incurring approximately $75 billion in economic losses predominantly due to flooding. The claims resulting from hurricanes Helene and Milton alone reached around $37.5 billion, with a substantial portion drawn from the National Flood Insurance Program, highlighting the importance of addressing storm surge damage.

Cole Meyer, head of Aon’s parametric solutions, noted that storm surge damages can represent over a third of total losses from some hurricanes. This prompted the development of a collaborative parametric solution designed to enhance existing insurance coverage for corporates, public entities, and reinsurers alike, ensuring they are better protected against these risks.

Parametric insurance differs from traditional indemnity insurance by relying on predefined metrics, such as water height, to determine payouts. This allows policyholders to choose their payout levels based on anticipated storm surge, with the funds being applicable toward any financial losses experienced. Various meteorological data sources are utilized for assessing the inundation from hurricane-related storm surges.

“Parametric insurance provides a fast, flexible and transparent way to cover financial losses caused by natural catastrophes,” remarked Martin Hotz, head of parametric natural catastrophe at Swiss Re Corporate Solutions. This solution aims to facilitate prompt financial assistance for companies in vulnerable regions through coverage that aligns with their risk management strategies.

The development of parametric insurance solutions stems from the increasing severity of natural disasters, specifically hurricanes, which have caused significant economic losses in recent years. Traditional insurance often leaves considerable gaps in coverage, necessitating new products that can offer timely financial relief. The collaboration between Aon, Floodbase, and Swiss Re aims to address these challenges effectively by leveraging advanced data sources and parametric models.

Aon’s new parametric insurance solution signifies a strategic advancement in hurricane-related risk management. By bridging existing coverage gaps and offering transparent payout structures based on quantifiable metrics, businesses can achieve better financial security against storm surge impacts. This initiative highlights the necessity of innovative approaches in securing against increasingly unpredictable natural disasters.

Original Source: www.insurancejournal.com