By Bill Barbato, 2VP of Risk Control, TravelersBoiler & Machinery

The continental U.S. is in the grip of one of the worst winterson record. Snowstorms, sub-zero temperatures and other extremewinter weather is even affecting regions that typically experienceonly mild winters.

Read related: January Winter Weather Could Cause Over $1.5B in InsuredLosses

Agents and brokers should prepare their commercial realestate clients to mitigate losses arising from bad weatherthrough business continuity plans. Although this discussionshould include a review of the client's current business insurancepolicies and loss exposures, it should also include a discussionabout the risk of equipment breakdown; an often-overlooked riskthat cost commercial real estate companies hundreds ofmillions of dollars in losses this year.

Many businesses may not understand how vulnerable they are intoday's computer-driven electronic world, nor do they realize howequipment breakdowns can impact their bottom line. For example, acompany's 200-ton air-conditioning system froze last summer due toa control failure. As a result of advance planning, the company wasable to rent a unit while its system was being repaired. Without aplan in place and insurance to cover unforeseen additionalexpenses, this event could have cost the company upward of $50,000dollars.

Few businesses can withstand setbacks like this. Not onlyare they costly, but they can damage productivity and severely testclient relationships.

It is important to speak with clients about ways to mitigate therisks of equipment breakdowns when establishing a businesscontinuity plan.

Click on the following pages to see the three keypoints to cover:

1. Identify critical equipment exposures in yourclient's business processes.

Every company has equipment functions that are critical to itscore business. Agents can guide their clients through this firststep by helping them identify all of the criticalequipment in their business process. For each piece of equipment,the business owner should ask a few primary questions:

• If this piece of equipment breaks down, what would happen toour operations?
• How long could we tolerate the disruption?
• Who could provide a repair or replacement?

The type of equipment critical to operations will vary frombusiness to business. For example, an office building willtypically have a heating system, air conditioning equipment,computer and telephone systems and other electrical equipment,while a hospital will have these items plus high pressure boilers,transformers, medical diagnostic equipment and other specializedplant services.

2. Ensure proper routine maintenance

Failure to conduct routine maintenance is a common mistake thatmany building owners make, so it's vital that agents work withtheir clients to verify that this critical activity is beingperformed. Key questions a building owner should ask include:

• Am I maintaining equipment per the manufacturers'recommendations?
• Are my maintenance activities being documented to create anequipment maintenance history record so I can spot trends andbetter plan future maintenance activities?
• Have I identified qualified service providers and theavailability and location of routine replacement parts?

Routine inspections and preventative maintenance in accordancewith manufactures' guidelines are the most important activitiesthat a business owner can perform to help avoid unplanned equipmentoutages.

3. Include equipment breakdown contingencies in yourbusiness continuity plan

A well-developed business continuity plan helps ensure abusiness can remain in operation after an unforeseen event. Abusiness continuity plan should include contingencies that considerhow to recover should an equipment breakdown occur. For each pieceof critical equipment, the plan should identify reliable sourcesfor repair parts and qualified service providers that can assist inrepair or replacement. Also, the plan should identify where rentalequipment can be obtained; how and where that equipment can beinstalled; who is qualified to operate it as well as any speciallicense or permit that may be necessary or required. The planshould be well documented and familiar to key management personnel.Finally, the plan should be tested to verify that it can beimplemented within the required recovery timeframe and reviewedannually to ensure the plan remains relevant.

Although a business continuity plan is essential, it shouldbe combined with proper insurance, including an equipment breakdownpolicy. This coverage typically covers repairs or replacements asneeded, makes up for lost income due to a business interruption andgets the business back up and running quickly. Insurance agents andbrokers who can serve as an expert advisor on insurance productsand help clients to identify and manage these types ofrisks will increase their value to their clients and prospectiveclients.