Although property insurance rates continue to decline, businesses must still consider a range of critical risks to their physical locations and assets.
Here are five top risks that property insurance buyers should watch for in 2017:
Droughts that have plagued parts of the U.S. for years may get worse this year. The National Interagency Fire Center (NIFC) reports that the southern plains will see an increase in seasonal wildland fire activity beginning in February. And although winter precipitation there was higher than normal, parts of California remain dry.
Floods are the most costly natural hazard in the U.S. This risk is slowly changing — growing in the northern half of the U.S. and declining in the south. The U.S. Federal Emergency Management Agency (FEMA), which manages the National Flood Insurance Program (NFIP), has secured $1 billion in reinsurance to help it weather major storms between January 1, 2017 and January 1, 2018.
Both major modeling vendors continue to learn more about ongoing seismic activity, actual losses, and construction innovations. New models expected to be released this year will incorporate these findings and include the latest information around fault systems, ground-motion decay, and vulnerability enhancements.
The use of ransomware — a type of malware that encrypts or locks your files until you pay the perpetrator — increased in 2016. A cyber-attack using ransomware or other sophisticated means could shut your operations down for weeks or months, creating a business interruption cost you may not be able to afford. Keep in mind that cyber is no longer just a third-party or data privacy issue — it's just as much a first-party risk.
5. Terrorism, political violence, and active shooters
Although the renewal of the Terrorism Risk Insurance Program Reauthorization Act through 2020 has helped remove some uncertainty around terrorism insurance, buyers and underwriters are keenly aware of the potential for a terrorist attack — especially in long-targeted central business districts.
What you can do
Knowing the risks is a great start, but how do you make that information work for you?
The following suggestions are intended to help you manage your exposures:
- Design emergency plans to protect your resources and maintain business continuity.
- Use the latest modeling tools and techniques to understand your catastrophic risk exposures and address them in your insurance policies.
- Review your property and standalone cyber policies to understand how they work together and identify any gaps.
- Keep your antivirus and malware protection software up to date, and back up your data regularly.
- Ensure your employees are trained to identify the warnings signs of violent behavior.
By keeping traditional and emerging risks top of mind, your organization will be better able to protect your people and bottom line in the event of natural or man-made disaster.
Duncan Ellis is a managing director resident in the New York office and is the leader of Marsh’s U.S. Property Practice. This article first appeared on Marsh.com and is reprinted here with permission. Visit the Marsh Risk in Context blog for the original post.