Aon Launches Parametric Insurance for Hurricane Storm Surge Risks

Aon plc has launched a parametric insurance solution for U.S. commercial entities to address hurricane storm surge losses. Teaming with Floodbase and Swiss Re, this product provides broader coverage compared to traditional insurance, which often has significant exclusions. Following Hurricane Helene, which caused $75 billion in damages, this solution aims to improve financial resilience after such disasters.

Aon plc has introduced a new parametric insurance solution aimed at reducing commercial losses caused by hurricane-related storm surges on the U.S. coast. This product, developed in collaboration with Floodbase and Swiss Re Corporate Solutions, aims to fill the coverage gaps in standard insurance policies, which often impose high deductibles or numerous exclusions for storm surge events.

The recent 2025 Climate and Catastrophe Insight report by Aon identifies Hurricane Helene as the most catastrophic natural disaster of 2024, with an estimated $75 billion in economic damages, chiefly due to flooding affecting inland and coastal areas. Insurers faced around $37.5 billion in claims from hurricanes Helene and Milton, including payouts from the National Flood Insurance Program.

Storm surge damage is particularly significant, representing over one-third of the total loss in some hurricane incidents. Cole Meyer, Aon’s head of parametric solutions, emphasized the notable financial impact of storm surge on corporations and public entities, highlighting the need for this parametric insurance option to enhance coverage levels.

Unlike traditional indemnity policies, this parametric insurance is based on measurable water height, allowing clients to determine their desired payout level related to storm surge occurrences. Various meteorological data sources are employed to evaluate storm surge inundation.

Martin Hotz, head of 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.” This innovative solution assists corporations in high-risk areas with swift payments that align with their unique risk management needs.

Hurricane storm surges present a significant hazard along the U.S. coastline, leading to substantial economic losses and extensive insurance claims following such events. Traditional insurance policies can often leave critical coverage gaps, necessitating alternative solutions. Parametric insurance serves to fill these voids by offering a structure based not on indemnity but on predefined parameters, such as water levels, facilitating quicker financial relief after disasters.

Aon, together with Floodbase and Swiss Re, has launched a comprehensive parametric storm surge insurance solution tailored to address hurricane-related financial losses. This product responds to the critical challenges posed by traditional policies, offering a more efficient and adaptive form of coverage for businesses vulnerable to storm surge damage. Such innovations are crucial for improving response strategies in disaster-laden regions.

Original Source: www.insurancejournal.com