From the September 3, 2012 issue of National Underwriter Property & Casualty • Subscribe!

Mitigating Hurricane Losses: 7 Steps to Aid in Catastrophe Recovery

With forecasters predicting slightly below-average activity for the remainder of the Atlantic hurricane season, relief is tempered by two truths: Some 90 percent of all major hurricane activity typically occurs after August 1. And just one significant land-falling hurricane, which is likely even in a “light” season, can be devastating. The 2011 season was relatively benign, for example—unless you were in the path of Hurricane Irene or were affected by Tropical Storm Lee in the Gulf region.

So be cautiously optimistic, but not complacent, as we enter the prime season. You cannot alter the course of Mother Nature, but you can alter the impact a big storm has on your business income and revenue streams.

Business-interruption costs are a large part of any hurricane losses and can have a major impact even on facilities not severely damaged by a storm. It is important that you have a well-thought-out catastrophe plan designed to provide safety for your employees and protect your property. There are steps you can take now to mitigate the costly business interruptions that can follow a hurricane—or any catastrophe.

1. Establish service agreements before an event occurs: After a storm, experienced restoration and remediation service providers are in high demand. If you start to initiate your search for a remediation company to handle your loss after a major event, many of their resources may be committed to other projects.

Therefore, you may not be able to obtain the services, equipment and manpower needed to start the remediation process, causing potential business-interruption losses, as well as escalated property-damage costs. Water damage can elevate to mold issues, for example. Pre-contracting (and pre-establishing rates) with qualified remediation companies can help you rest assured that your needs will be met.

Along with restoration contractors, consider other services you might require—from debris removal to structural engineering—to determine if a damaged building is safe to occupy. Also think about pre-contracting for services to help preserve property before an imminent event, such as bringing in sandbags and boarding up windows.

2. Line up alternative worksites: Create a contingency plan to relocate your key operations outside of the area affected by a catastrophe. Consider data access (redundancies are critical), call centers and the labor you need to keep your business moving forward. Be creative: Some big box stores have opened shop in trailers in their parking lots after a hurricane. Such a commitment to continuity is not only good for a company’s finances, it’s a boon to its reputation.

3. Weigh your need for generators: Generators are very important for entities like health-care facilities, supermarkets and schools—and a prudent investment for other enterprises that want to keep critical functions operating. Be sure to safely and securely stock fuel for your generator.

4. Consider your workforce: After Katrina, one New Orleans fast-food franchise owner worked with his insurer to pay idled workers while the restaurant was closed for repairs. He then had an experienced crew ready to go when the restaurant reopened—and was one of the few establishments positioned to serve adjusters, contractors and others working on recovery. Assuming your policy provides coverage for such expenditures, such worker incentives can ultimately mitigate losses by enabling businesses to avoid the time and costs of rehiring and retraining personnel.

5. Look up your supply chain: What alternative resources might you need to prevent contingent business-interruption loss? For example, the bottled-water producer might not be in the area hit by a hurricane—but its bottle manufacturer is. Be ready to source vital materials elsewhere.

6. Track expenses: Consider setting up a separate accounting ledger to track storm-related expenses. Document work done and expenses incurred to mitigate damages and present these to your insurer once you have reported your claim. This includes extra expenses, like post-storm security, which may be covered.

7. Tap into your insurer and broker: They have the experience and resources to help ensure that you have the right coverage in place and the resources at your disposal to help you prepare for and respond to catastrophic events.

In addition, always know where your policy is and exactly how you can report a claim to your insurer quickly. Optimally, you will have several options, including mobile apps and email.

Taking these steps requires some forethought and effort—but they will undoubtedly pay off when the time comes to recover from a major storm. Hope for the best, but envision the worst as you prepare to respond effectively if that next named storm heads your way.


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