Preparing for the storm

Ahead of the annual AMRAE conference and following a year of record storm-related losses, BELFOR outlines the need to be prepared for the worst.

Many risk managers feel they have been in firefighting mode for the last two years, struggling to stay ahead of one crisis after another. Reporting risks is no longer enough. It is critical that risk managers are able to prepare for risks before they happen.

While new risks have emerged in recent years, traditional risks have also increased. In the last five years, insured losses from natural catastrophes have resumed a long-term growth rate of 5% to 7% annually, following a benign phase of lower annual losses in the 2012-2016 period.

Risk managers have also had to deal with a hardening insurance market and all that brings – a rise in premiums and exclusions, and a reduction in capacity and coverage. Research produced by French risk and insurance management association AMRAE in its annual State of the Market report showed that companies faced premium price rises and shrinking capacity in most lines.

One area where the lack of capacity is conspicuous is business interruption (BI). Not only has coverage declined but the likelihood of long business interruptions has increased. For example, the cost and waiting times for replacing machinery have both increased; 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 BI much more difficult.

Business interruption concerns

The concerns around BI were evident in the extreme weather events that wreaked damage on households and business across Europe in the last 18 months. France was one of the hardest hit countries in 2022 thanks to an unprecedented number of hailstorms that caused record-breaking losses.

In the first eight months of 2022, France Assureurs, formerly the French Insurance Federation, recorded nearly one million individual claims due to storm damage. The insurance industry is expected to pay more than €4bn in storm-related claims.

When the associated losses from BI are added, the total payout is expected to exceed €6bn, according to reinsurers.

The lack of restoration companies, insurers and other service providers was exposed for all to see by the floods, contributing to the commercial trauma experienced by so many small and medium enterprises.

Consequently, the hail storms 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.

As one senior risk manager said: “It seems that we are always struggling, always in firefighting mode, always trying not to drown, always in the middle of the storm. We need to get ahead of the wave. We need to prepare for foreseeable challenges and risks before they happen. We need to get ahead of the wave. Only reporting risks is not enough.”

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.

In recognition of the growing risks faced by French companies, BELFOR has significantly strengthened its presence in the French market over the last year. In December it acquired EOS Group, a claims management business, adding to its earlier acquisitions of Partech Services and BATI Intervention.

BELFOR will also be present at this year’s AMRAE meeting of French risk and insurance managers in Deauville in February, where the rise in natural catastrophes and business interruption, the decline in insurance capacity and the need for companies to manage their own risk are all subjects on the agenda.