Storm Management

The Atlantic hurricane season forecasts are in and they aren’t pretty. All the major forecasters have predicted the season will be much more active than last season. The National Oceanic and Atmospheric Administration (NOAA) expects an “active to extremely active” hurricane season, projecting a 70 percent probability of three to seven major hurricanes (category 3 or higher). NOAA’s forecast is consistent with others. The best news may come in the fall when we learn that the forecasters were all wet. But until then, they must be heeded.

According to the U.S. Census Bureau, approximately half of the U.S. population lives within 50 miles of a coastline. According to insurance broker Marsh, at-risk industries include commercial real estate, hospitality, and public entities. The energy industry is also vulnerable, but has managed prior catastrophes, such as Hurricane Ike, relatively well, the broker says.

As recent events including flooding in Tennessee and other states, earthquakes in Latin America and Asia, a volcanic eruption in Iceland, and the Gulf of Mexico oil spill demonstrate, catastrophic events can have an effect on property insurance capacity and pricing. Knowing this, insurance broker Marsh did what brokers should be doing in situations like this and released recommendations for risk managers and business owners on how to prepare for the season, including:

Pre-Loss Measures

• Establish a catastrophic response team, which should include representatives from risk management, engineering, finance, human resources, legal, public relations and security, as well as a broker claims consultant and forensic accountant.
• Reconfirm or establish objectives of claim loss management plans with a broker, claims representatives and-if one is assigned-an account adjuster.
• Consider impact scenarios and develop decision models to understand and manage emerging threats related to hurricanes.
• Develop and regularly update business continuity and disaster recovery plans.
• Review supply chain management procedures to understand and minimize exposures related to suppliers, and consider alternative routes to market if traditional transportation methods could be disrupted.
• Complete up-to-date business interruption and property damage valuations.
• Ensure proper compliance with building codes.
• Develop properly worded and tested claims procedures.

Post-Loss Measures

• Arrange forensic accounting services to measure losses and prepare the financial metrics necessary to file a claim.
• Secure the assistance of a claims advocate from an agent or broker to prepare and manage the presentation of claims to underwriters.
• Secure preferred contractors to assist in necessary repairs following an event.

Risk management for a catastrophe is a bit like carrying an umbrella. Often times you carry it, and end up not needing it. But when it does pour, you’re sure glad you have it with you – and didn’t forget it at the last meeting.

Topics Catastrophe Agencies Claims Windstorm Hurricane