Valencia floods – a lesson in business interruption

As annual Amrae conference comes to a close, Guillaume Beauhaire, key account manager at Belfor France, talks about the lessons businesses in Valencia are now learning the hard way after the 2024 floods. For French companies, the event should serve as a warning.

On 29 October, the Spanish region of Valencia suffered a year’s worth of rain in a single day. The results were devastating. There were 232 fatalities and significant damage to buildings, businesses, infrastructure and vehicles. More than 100,000 cars were damaged and 1,800 companies were destroyed, while more than 4,500 suffered business interruptions of varying degrees.

Biggest loss event in 2024

In insurance terms, it was the biggest loss event in Europe in 2024. According to Munich Re estimates, the total damage was around $11bn, of which $4.2bn were insured losses. The Insurance Compensation Consortium (Consorcio), the state-based Spanish catastrophe risk insurance scheme, estimates that the event will cost €3.5bn, more than three times its highest previous loss and Spain’s worst-ever nat cat event.

The cause and contributors to the catastrophe in Valencia were numerous – from the geography of the area, which includes an alluvial floodplain and a mountain range, to the urbanisation of the region and, of course, the effects of climate change.

For French companies, the event should serve as a warning. France has already been subject to significant nat cat events in recent years. In January 2024, heavy rainfall caused floods in northern France, resulting in evacuations and property damage. One year on, France was then hit by more torrential rainfall and floods from storm Herminia, which hit towns in the west of France.

When Valencia was overwhelmed by floods, Belfor was on the ground from day one, providing critical recovery services to the impacted businesses. In addition to Belfor’s Spanish team, additional resources were brought in from across Europe. In total, Belfor provided more than 100 people from seven countries to help affected businesses and clients.

The importance of preparation to minimise business interruption

The Valencia floods showed, once again, the importance of preparation. In the aftermath of the event, the Consorcio came under intense scrutiny for its response. The floods also showed that there are two kinds of companies – those that are prepared to build resilience into their operations and those that are not. For the former category, let me give you an example: one company, a large plastics components manufacturer that could not afford to lose market share because of a business interruption, opted for a quick route back to production and called Belfor.

The company had 70 machines that were one to two metres below water, and through Belfor’s help they were back to 60% working capacity within two weeks. “We’re amazed how quickly you got it undone,” stated the company’s CEO. “We can produce, we have a future! But, no offense, we hope to never have to see your rubber boots again.”

If companies don’t prepare…

In contrast, those companies that do not take these preparatory steps will face increased costs and delays in their recovery due to the finite number of loss adjusters and recovery specialists, delays that could seriously disrupt their supply chains and threaten not only their market share but their very existence.

In an event like the Valencia floods, there will be confusion about what to do first. With no priority status, the company will have to wait in line and have no immediate loss assessment, making it impossible to take any quick decisions. In the meantime, the damage gets worse, the costs of recovery are inflated, the claims continue to worsen and your customers are alarmed.

Even now, in February, some companies in Valencia have finally made the decision and we are receiving their claims. Perhaps a little late. Three months (and more) of business interruption could have been resolved by now. We will, of course, help them to restart their production if possible, but this may not be enough to help them regain the market share and reputation they have lost.

Our RED ALERT® customers on the other hand got help immediately with boots on the ground, as promised by the RED ALERT® contract. They got a quick assessment of the damage, a clear concept how to move forward, cost clarity and, of course, expert knowledge. The speed of the response was possible because emergency procedures have been discussed in the clean environment of the meeting room in advance and not while standing on the muddy floor of flooded buildings.

Prepare now to stay in business when nat cat hits your company

The increased risk from nat cat events has been noted by risk managers. The most recent Risk Barometer from German insurer Allianz saw business interruption and nat cat risk ranked as second and third respectively, while climate change reached its highest-ever ranking (fifth).

The best time to act was yesterday – the second-best time is now. There appears to be no safe space on earth any more and businesses need to be prepared for more extreme weather events and damages. If your company can’t afford supply chain disruptions, consider RED ALERT® to prepare and minimise downtime like our customers in Valencia.

In an event of a national disaster and increased demand, you are our top priority – RED ALERT® clients skip the line and get served first. Whatever happens, wherever it happens: We will make it undone.