Aon, a prominent global professional services firm, has successfully completed a “historic” parametric insurance program for the Government of Puerto Rico.
This initiative aims to assist the island in reducing its insurance obligation to the U.S. Federal Emergency Management Agency (FEMA), providing diversified insurance protection against hurricane and earthquake perils.
Representing the largest government-sponsored parametric transaction for Puerto Rico, this innovative program not only bolsters the island’s response to catastrophe events but also becomes the inaugural parametric insurance protection mechanism employed to reduce FEMA’s Obtain & Maintain (O&M) requirement.
By implementing an onshore and offshore parametric program, Puerto Rico gains access to swift liquidity to support recovery and reconstruction efforts.
The collaboration between Aon and the Government of Puerto Rico showcases a proactive approach to address the protection gap and identify capital solutions.
Aon Securities, led by Paul Schultz, Chairman and CEO, spearheaded a cross-functional team consisting of subject matter experts, geographically diverse professionals, product teams, and analytics specialists.
Together, they designed and delivered an optimised parametric solution tailored to the government’s needs.
Unlike traditional insurance coverage, the parametric program does not necessitate proof of loss to initiate a payout. Instead, payouts are triggered automatically when a major hurricane or earthquake surpasses a pre-defined threshold, enabling faster access to critical funds.
In addition to structuring and placing the transaction, Aon provided advisory and consulting services to the Government of Puerto Rico in collaboration with various public agencies such as AAFAF, FEMA, the Federal Oversight and Management Board for Puerto Rico (FOMB), the Office of the Puerto Rico Insurance Commissioner, and COR3.
Katie Sabo, Managing Director and State and Local Leader for Aon’s Public Sector Partnership, emphasised the significance of the parametric cover in strengthening Puerto Rico’s resilience against natural disasters.
She lauded Aon’s deep expertise in the public sector and extensive knowledge in designing customised parametric solutions tailored to the specific needs of state and local clients, enabling them to make informed decisions.
