Storm risk mitigation efforts in focus as hurricane season begins

With the 2023 hurricane season looming, organisations in vulnerable areas should ensure they are prepared to recover quickly if a storm strikes, experts say. Businesses that establish relationships in advance with contractors and vendors for clean-up, equipment and restoration services can help minimise added costs and delays in recovery when a hurricane hits. Developing a network of alternative suppliers ahead of hurricane season is also critical, as higher material costs and labour shortages can add to business interruption costs, they say. The start of the 2023 Atlantic hurricane season, which officially gets underway on 1 June, comes as commercial property owners face continued insurance premium increases, which have forced many to retain more risk. A slightly less active hurricane season than average is expected, according to an initial forecast released in April by Colorado State University, which predicts 13 named storms, compared with the average of 14.4 between 1991 and 2020. The best way for businesses to protect themselves when they’re retaining more risk is to make sure they can prevent losses, said Christie Weinstein, director, risk management, at Honeywell International and a board director of RIMS. Risk managers should review their emergency response plans, check who their suppliers are, where they’re located, and consider whether they could be affected in the event of a hurricane, flood or power outage, Weinstein said. “Do you have an alternative supplier network? What’s your continuity plan? A lot of things can go wrong. Even if you don’t have a physical loss or damage to your site, one of your suppliers or supplier’s sites could be impacted,” she said. There are many constraints on supplies after a hurricane, said Blake Berscheid, senior property claims director at Brown & Brown. “It’s difficult to get gas, food, housing, and hotels, and resources are stretched between adjusters and contractors,” he said. Having a plan that determines who is responsible for what can reduce confusion during the claims and recovery process in the wake of a hurricane, Berscheid said, adding: “I’m a big advocate for getting advance contracts in place with restoration vendors that can help get your business preferred pricing.” Contracts assure companies of priority assistance and supplies, and they also know who will be on-site, he said. Businesses should have a formal written plan that has been tested and that employees have been trained on, and ensure they have all the materials needed to protect their facilities ahead of the season, said Ted Cabaniss, lead risk control consultant at QBE North America. Having response plans established with local contractors and vendors that can react to different types of damage, ranging from providing extra fuel for generators to supplying portable HVAC equipment in the event of power outages, is critical, Cabaniss said. “A lot of times, after an event, (a community) is absolutely flooded with needs and if you don't have those relationships and arrangements made upfront and set aside, you're likely going to be waiting for a long, long time,” he said. In the wake of Hurricane Ian, which made landfall in Southwest Florida last September, the recovery and rebuilding process has been slow, according to a survey conducted in April by Karen Clark & Co. “We talked to contractors and property owners, and it seems that, in terms of supply, materials are not an issue, but labour is the biggest issue and a real challenge and driving up costs,” said Karen Clark, co-founder and CEO of the catastrophe modelling company. Major hurricanes tend to lead to price increases for construction materials and labour as demand rises, resulting in higher costs to repair or replace damaged property, and catastrophe models incorporate this, she said. Hurricane Ian caused an estimated insured loss of $63bn, which includes estimated demand surge, according to KCC. Some demand surge would be expected, but Ian was not an “extreme” event, Clark said. Inflation has also contributed to higher reconstruction and replacement costs, experts said. Insurers continue to push for accurate property valuations from policyholders, and policies may have valuation clauses or restrictions in how they respond in the event of loss, “based on their view of your values versus your own view”, Weinstein said. Businesses should review their policies and talk with their brokers to determine if their recorded values are adequate for the exposure and whether the policy has any limitations, Berscheid said. “There is constant dialogue with our insureds and with our agents on ensuring that we have captured the correct value and that we have provided adequate coverage for what they have and what they own,” said Lindsay Duke, assistant vice president, lead, claim relationship management, at QBE North America. This article first appeared on our sister website Business Insurance. For further news from Business Insurance, please click here.

Storm risk mitigation efforts in focus as hurricane season begins

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Want to read this article?

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