Aon has launched a parametric insurance solution in collaboration with Floodbase and Swiss Re to address commercial losses from U.S. hurricane-related storm surges. The product helps fill gaps in traditional insurance policies, which often have high deductibles or exclusions for this risk. It is based on water height and allows flexible payout options, promoting better risk management for affected corporations and entities.
Aon plc has introduced a new parametric insurance product aimed at reducing commercial losses from storm surges associated with hurricanes along the U.S. coastline. Collaboratively developed with Floodbase and Swiss Re Corporate Solutions, this innovative solution addresses gaps in traditional insurance coverage which often entail high deductibles or significant exclusions for storm surge risks.
In its 2025 Climate and Catastrophe Insight report, Aon highlighted Hurricane Helene as the most severe natural disaster of 2024, resulting in approximately $75 billion in economic damages due to flooding. Insurers faced around $37.5 billion in claims due to the destruction caused by Hurricanes Helene and Milton, with a portion arising from the National Flood Insurance Program.
For many hurricanes, damage from storm surges constitutes over one-third of total loss expenses. Cole Meyer, head of Aon’s parametric solutions, emphasized the importance of addressing storm surge impacts, stating that this solution enhances coverage for corporations, public entities, and reinsurers facing significant risk from such events.
Parametric insurance can function independently or be integrated with other insurance options. Unlike traditional indemnity insurance, a parametric product bases payouts on specific water height measurements. Policyholders can choose their desired payout level for defined storm surge levels, with proceeds applicable for any financial losses incurred during the event.
Martin Hotz, head of parametric natural catastrophe at Swiss Re Corporate Solutions, remarked, “Parametric insurance provides a fast, flexible and transparent way to cover financial losses caused by natural catastrophes.” He added that the new solution assists vulnerable corporations with a swift payout mechanism that aligns with their risk management strategies.
The increasing intensity and frequency of hurricanes due to climate change have necessitated innovative insurance solutions to protect businesses and properties. Traditional insurance policies can leave significant exposure to risks like storm surges. Parametric insurance offers a modern approach to address these gaps, providing more immediate financial support based on quantifiable metrics such as water height in storm conditions.
In conclusion, Aon’s new parametric insurance solution addresses the critical needs for coverage against hurricane-related storm surge losses. By collaborating with Floodbase and Swiss Re, Aon aims to mitigate coverage gaps inherent in traditional insurance. This initiative highlights the growing importance of adaptable and transparent insurance options in an era of increasing climate-related risks, benefiting various entities affected by such natural disasters.
Original Source: www.insurancejournal.com
