Creating a BC plan fit for a more hazardous future
Ahead of the annual Airmic conference and in the face of record storm-related losses, BELFOR’s Kevin Duffin highlights the need to be prepared
New risks have emerged in recent years but traditional threats like natural catastrophes have also increased. In the Allianz Risk Barometer 2024, cyber risk was cited as the top business risk globally at 36% but was closely followed by business interruption (31%). Interestingly, traditional physical risks such as natural catastrophes and fires and explosions are also of increasing concern, as cited by 26% and 19% of risk managers respectively.
In fact, natural catastrophe has risen three places up the Allianz risk radar on the back of a tempestuous year. Total losses from natural catastrophes in 2023 are estimated to be more than $260bn, according to Swiss Re Institute.
The Allianz Barometer has noted that the increasing influence of changing climate conditions boosted the development of certain weather events in 2023, and natural catastrophe is now the second-biggest concern when it comes to business interruption (44% of responses) after cyber incidents.
At the same time, risk managers have had to deal with a hardening insurance market, a rise in premiums and exclusions, and a reduction in capacity and coverage, especially for business interruption. Not only has coverage declined, the likelihood of long business interruptions has increased. For example, the cost and waiting times for replacing machinery have both risen; the availability of spare parts has declined, as has the number of skilled mechanics and mechanics in general. And the lack of insurance will itself make recovery from business interruption much more difficult.
Business interruption concerns
Concerns around business interruption were brought to the fore by extreme weather events that wreaked damage on households and business across Europe and the UK in the last 18 months. The trio of storms that hit the UK in October and November 2023 (storms Babet, Ciaran and Debi) are set to cost insurers around £560m from more than 48,000 claims, according to the Association of British Insurers (ABI). As much as £155m will result from damage to commercial property.
The frequency, variety and severity of these weather events, especially CSCs, has caused damage to critical infrastructure, disruption to business, trade and travel, and difficulties for emergency services. Storm Henk, the eighth named storm to hit the UK in three months, caused power outages, transport disruption and flooding across the UK in January.
It is difficult for companies that suffer extensive business interruption from a natural catastrophe. The lack of restoration companies, insurers and other service providers was exposed for all to see by the extreme weather events this year, contributing to the commercial trauma experienced by so many small and medium enterprises.
These catastrophic events also showed why risk managers must try to get ahead of the crisis and how a solution like BELFOR’s RED ALERT® is of critical importance in today’s market.
BELFOR’s RED ALERT® service is structured to work alongside companies’ response plans and emergency procedures so that recovery can be more rapid and effective, and that any gaps in business continuity plans can be minimised. It also secures access to critical resources during a company’s hour of need.
- BELFOR® covers entire supply chains across all continents.
- RED ALERT® clients receive exclusive access to a dedicated hotline.
- RED ALERT® clients enjoy priority status. In the event of a national disaster and increased demand, RED ALERT® clients skip the line and get served first.
- No two businesses or even industries are alike. This is why BELFOR experts bring in specialist knowledge and experience of all businesses, being able to customise their services before, during and after a business interruption.
- By their nature, emergencies create uncertainty. RED ALERT® supports companies in defining their appropriate level of service, which corresponds to their prevention planning, making their business more resilient.
- The first hours following a disaster are crucial. Step-by-step protocols tailored to the client’s needs reduce the impact of any business interruption. That way, companies are ideally prepared for both minor incidents and worst-case scenarios.