5 things businesses can do now to prepare for hurricanes

As the magnitude of the losses from Hurricane Sandy becameapparent shortly after the storm, questions immediately began tocirculate as to why the losses were so high and whether this eventwould be the “new normal.” Five years after Sandy, HurricanesHarvey, Irma and Maria have confirmed those fears.

According to the 2018 Allianz Risk Barometer, in 2017 there wasapproximately $330 billion in overall losses from naturalcatastrophes. At least $90 billion of that total was from the threecategory 4+ hurricanes — Harvey, Irma, and Maria — that wreakedhavoc in September, making 2017 the costliest season on record.

Allianz has identified five steps businesses can implement nowto be better prepared for the 2018 hurricane season and beyond:

1. Test and update emergency preparednessplans

Preparation before the hurricane is the key to minimizingproperty damage and reducing business interruption. Allianzrecommends that every business located in a hurricane-prone areahave a comprehensive, written emergency response plan that isreviewed and tested annually.

A good plan has the support of senior management, has a cleardelineation of responsibilities among multiple teams —communications, IT, supply-chain risk management, compliance,production, and facilities, for example — and spells outsite-specific activities to complete before, during and after ahurricane.

And a good plan will enable the business to quickly implementmeasures after the disaster to restart production as quickly aspossible and to limit business interruption losses.

2. Understand what events to prepare for

Planning for a hurricane involves understanding your facility'ssusceptibility to high winds, storm surge and inland flooding. Yourfacility may be susceptible to all three or only one.

Preparing for flooding can be very different from preparing forhigh winds. The majority of preparations for Hurricane Sandy werebased on a high wind event, leaving many businesses unprepared forthe flooding. The National Weather Service now issues storm surgewatches and warnings to areas that have a significant risk oflife-threatening inundation from a tropical storm or hurricane.

The recent events in Southeast Texas during Hurricane Harveyillustrate the danger of massive urban flooding due tooverdevelopment. According to a recent Allianz report, the value of insuredproperty within the U.S. located in a coastal county is $13trillion, so it stands to reason that the exposure is huge. Inorder to protect coastal communities, zoning laws are needed to prevent unbridledoverdevelopment, along with less concrete and more green space toallow tropical rains to properly drain. For example, some areas ofHouston received about half the amount of rain from Harvey comparedwith the record-setting deluge of 154 centimeters (60.6 inches) inNederland, Texas, but experienced much worse flooding. Thedifference is overdevelopment.

Hurricane Irma, while packing a lot of rain, caused much morewind than water damage when it slammed into South Florida. No twostorms are the same, so businesses must mitigate against everypossible scenario.

3. Review and update business contingencyplans

The crucial role of business contingency plans has becomeincreasingly apparent as we investigate recent hurricanes,wildfires, mudslides and floods. Sandy hit the Northeast on aMonday, which made it difficult for employees to implement businesscontingency plans while preparing their homes and families for thestorm.

A well-developed contingency plan provides businesses with thetools to get back up and running as quickly as possible. Even ifyour facility sustains minimal damage from a hurricane, theoperations may be interrupted by power outages and accessibilityissues. A good plan shouldn't be a static, “write it and shelve it”document; it must be tested, table-topped and tweaked. That's wherebusiness continuity planning turns into business continuitymanagement.

In the event of a disaster like Hurricane Harvey, which has beentermed a “once-in-a-thousand-year” event due to unprecedentedrainfall and flooding, interruption of normal business activitiescould have been significant for any company.

4. Understand your property insurancepolicy

Business owners should take the time to read their currentpolicy and discuss with their brokers what's covered and wherethere may be gaps. Determine whether the limits of liability are inline with the current dollar value of the cost to repair or replacethe damage. Consider adding an extended period of indemnity clauseto the business interruption (BI) coverage to support the businessuntil it returns to its pre-loss financial condition.

During Harvey, claims adjusters anticipated business interruption losses to far outpace actual propertydamages. BI can be so devastating that many businesses that aren'table to resume operations within a few days of a disaster go out ofbusiness within a month.

5. Make improvements to the building andsite

There are a number of improvements that can be made to thephysical structures and to the site that allow a business towithstand the high winds and flooding that may accompany ahurricane. Some of the more effective improvements include thefollowing:

Employ emergency generators for loss of power.
Install flood gates and flood doors for importantbuildings.
Raise critical equipment above highest anticipated floodlevels.
Protect building envelope from high winds (roof, windows anddoors).

Businesses should take advantage of the calm before the storm toensure that they're ready for any eventuality — just in case.

Andrew Higgins, P.E., is Technical Manager —Americas, Allianz Risk Consulting, LLC, Alliance Global Corporate& Specialty Americas. He can be reached [email protected].

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