Aon introduces new parametric product
Aon has launched a new parametric insurance solution designed to address and mitigate losses from hurricane-related storm surge along the coast of the US.
Developed in collaboration with parametric flood expert Floodbase and Swiss Re Corporate Solutions, the new product can help bridge protection gaps in traditional insurance policies, which may demand high deductibles or include significant exclusions in policy wordings for storm surge risk.
According to Aon’s 2025 Climate and Catastrophe Insight report, Hurricane Helene was the single most devastating natural catastrophe event of 2024, estimated to have caused approximately $75 billion in economic loss, mainly due to U.S. inland and coastal flooding. For insurers, damage from Hurricanes Helene and Milton resulted in approximately $37.5 billion of claims, including pay-outs from public insurance from the National Flood Insurance Program.
For some hurricane events, storm surge damage can account for more than a third of the total loss cost.
The new parametric solution utilises a variety of meteorological data sources to assess hurricane-related storm surge inundation. In contrast to an indemnity insurance product – where pay-outs are aligned to traditionally adjusted physical damage – the parametric solution is based on water height, allowing policyholders to select the level of pay-out they require for a certain level of storm surge, with a rate calculated accordingly. The proceeds can be used for any financial loss associated with the event, addressing a substantially broader set of exposures than traditional insurance covers.
A storm surge is generally driven by intense tropical cyclone activity, as witnessed in the aftermath of Hurricane Ian in 2022, or Hurricanes Helene and Milton in 2024, with Helene causing a storm surge of more than 15 feet after making landfall in the ‘Big Bend’ coastal region of north-west Florida.
Cole Mayer, head of parametric solutions at Aon, said: “Our data shows that storm surge can be a significant driver of losses for corporates, public entities and re/insurers alike, so we developed this collaborative parametric solution to help bolster existing levels of cover. The solution can function either as a standalone product or in conjunction with traditional and non-traditional insurance policies, to ensure that clients can secure comprehensive protection for their U.S. storm surge exposures. It is part of a suite of Aon product offerings that together are helping to shape better decisions and more comprehensive sources of liquidity for clients.”
Martin Hotz, head parametric natural catastrophe at Swiss Re Corporate Solutions, said: “Parametric insurance provides a fast, flexible and transparent way to cover financial losses caused by natural catastrophes. A substantial part of hurricane-related losses can be the result of storm surge, and with this innovative solution we can better assist corporations in exposed areas with a rapidly-paying cover that fits their individual risk management strategies."
Annbjørg Medhaug, chief product and strategy officer at Floodbase, added: “The economic losses in the wake of major hurricanes are staggering. The inherent flexibility of this parametric storm surge product provides US coastal corporations with a much-needed solution to address their specific protection gaps. Floodbase is delighted to have collaborated with Aon and Swiss Re Corporate Solutions to develop this solution, which demonstrates our continuous commitment to uniting technology and risk capital in order to bring more comprehensive protection to cedents.”
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