Aon, Floodbase, Swiss Re launch parametric insurance for storm surge

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Aon, Floodbase and Swiss Re launch parametric hurricane-related storm surge insurance.

The product was a collaborative effort between the three companies and uses meteorological data sources to assess hurricane-related storm surge. 

Cole Mayer, head of parametric solutions at Aon, said in a press release: "Our data shows that storm surge can be a significant driver of losses for corporates, public entities and reinsurers 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."

The costliest events for insurers in 2024 were Hurricanes Helene and Milton, according to Aon's Climate and Catastrophe Insight. Global natural disasters in 2024 resulted in economic losses reaching at least $368 billion and were primarily driven by tropical cyclones, severe convective storms and floods.

Hurricane Helene caused catastrophic flooding and wind damage in the southeast U.S. and also generated significant storm surge damage across western Florida, including around Tampa Bay, according to the report. Tropical cyclones and severe convective storms were responsible for the vast majority of losses in the U.S., although a part of the hurricane-related loss was a result of inland flood and storm surge.

Aon's Impact Forecasting and Catastrophe Management teams conducted a damage survey in Florida in November 2024. Residents mentioned the extent of storm surge damage. 

Martin Hotz, head of parametric natural catastrophe at Swiss Re Corporate Solutions, said in a statement: "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 in a statement: "The economic losses in the wake of major hurricanes are staggering. The inherent flexibility of this parametric storm surge product provides U.S. 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."

Global losses surpassed $300 billion and were 14% higher than the long-term average, according to the report. 

Dispersion of disasters on the world map shows various patterns. For example, the largest concentration of catastrophe losses can be found in countries with high economic output. However, some losses might appear negligible on a global scale but they can have a significant impact. For example, Cyclone Chido hit the island of Mayotte, an archipelago off Madagascar in the Indian Ocean, in December, causing catastrophic damage that could exceed the GDP of the island.

Read more:

Impacts of hurricanes Helene, Milton linger in Southeast

Congress to mull long-term fix for federal flood insurance