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Companies have ways to reduce climate risks: Panelists



SAN FRANCISO – Corporate recovery plans and corporate risk management programs are among the strategies that can help risk managers manage climate risks, experts said during a session at the Risk & Insurance Management Society Inc.’s Riskworld conference.

Retreating from climate risks is not an option because “people will always vacation where the earth moves and the wind blows,” said Jennifer Pack, head of risk management at Hyatt Hotels Corp., which has a portfolio of more than 1,100 hotels and locations in 70 countries.

Hyatt’s risk management focus is on ensuring that hotels are properly protected and that they have a sound business plan to ensure that they can recover and get started again quickly, Pack said.

It sends out engineers regularly to test the construction of hotel properties to make sure they can withstand hurricanes and floods, she said. “We do not want guests to worry about the roof or walls flying off,”

; she said.

Before the hurricane season, it also reaches out to its hotels to ensure that they are ready and test their emergency preparedness plans and carry out exercises.

Companies can mitigate the effects of forest fires by building defensible space around properties and having sound business continuity plans, says Michael Lubben, Head of Global Risk Management, at Henry Crown and Co./CCI.

For example, designing a golf course around an upscale resort helped mitigate the effects of the Thomas 2018 forest fire on one of the company’s California properties. As a result, there was no direct fire loss to the resort, even though it suffered losses due to soot and heat, Lubben said.

It can be difficult to get the business to buy into business continuity plans, but it “pays dividends for us,” he said. In addition to having buffers, it is important to ensure that the facilities have a plan if the fire spreads, such as proper storage of combustible and flammable materials, he said.

Risk management for climate change is increasingly becoming part of organizations’ risk management programs for companies, said Lubben. Listing climate change in its risk register has made the risk more visible to Henry Crown’s board and top management, he said.

“When they make strategic acquisitions, for example … we can start thinking about where a target company is and how climate change will affect the facilities we buy,” he said.

When it comes to insurance, a larger portion of the risk can be retained through self-insured retentions and using a captive insurer will help mitigate the effects of climate risks, the risk managers said.

During Hurricane Maria, retention in Hyatt’s property insurance program was so high that there was no insurable loss for the program for its Florida properties, Pack said.

“If you work with insurers who do not really like the risk, the first thing is to take a higher retention,” said Lubben. “Sometimes it helps.”

Henry Crown also uses its captive insurer to access the reinsurance market for its real estate program and to provide coverage for certain exposures, he said.

It may be that climate change will be the cyber of the future, said Karin Landry, managing partner at Spring Consulting Group LLC.

When you look around at RIMS Riskworld, many customers see 300% increases in their cyber renewals, Landry said. “We are starting to see similar effects from climate change,” she said.


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