With the 2023 hurricane season approaching, organizations in vulnerable areas should make sure they are prepared to recover quickly if a storm hits, experts say.
Companies that establish relationships in advance with contractors and suppliers for cleanup, equipment and restoration services can help minimize additional costs and delays in recovery when a hurricane strikes.
Developing a network of alternative suppliers ahead of hurricane season is also critical, as higher material costs and labor shortages can increase business interruption costs, they say.
The start of the 2023 Atlantic hurricane season, which officially begins June 1, comes as commercial property owners face continued insurance premium increases, which have forced many to retain more risk.
A slightly less active than average hurricane season is expected according to an initial forecast released in April by Colorado State University, which calls for 13 named storms, compared with the 1991 to 2020 average of 14.4.
The best way for companies to protect themselves as they retain more risk is to make sure they can prevent losses, said Christie Weinstein, New York-based director of risk management at Honeywell International Inc. and a Risk & Insurance Management Society Inc. . Board member.
Risk managers should review their emergency preparedness plans, check who their suppliers are, where they are located and consider whether they could be affected in the event of a hurricane, flood or power outage, Weinstein said.
“Do you have an alternative supplier network? What is your continuity plan? Many things can go wrong. Even if you don’t have a physical loss or damage to your site, one of your suppliers or suppliers’ sites could be affected, she says.
There are many constraints on supplies after a hurricane, said Blake Berscheid, Minneapolis-based senior property claims director at Brown & Brown Inc. “It’s hard to get gas, food, housing, hotels, and resources are stretched between adjusters and contractors. ” he said.
Having a plan that determines who is responsible for what can reduce confusion during the claims and recovery process in the wake of a hurricane, Berscheid said, adding, “I’m a big proponent of getting precontracts in place with restoration providers that can help you to receive your company’s preferred rates.”
Contracts assure companies of priority help and supplies, and they also know who will be on site, he said.
Businesses should have a formal written plan that’s been tested and that employees have been trained on, and make sure they have all the materials needed to protect their facilities before the season, said Ted Cabaniss, senior risk control consultant at QBE North America, which is based in Spartanburg, South Carolina.
Having response plans established with local contractors and suppliers who can respond to various types of damage, from providing extra fuel for generators to supplying portable plumbing equipment in the event of a power outage, is critical, Mr. Cabaniss.
“A lot of times, after an event, (a community) is completely inundated with needs and if you don’t have those relationships and arrangements made in advance and set aside, you’re likely to be waiting a long, long time,” he said.
In the wake of Hurricane Ian, which made landfall in southwest Florida last September, the recovery and rebuilding process has been slow, according to a survey conducted in April by Karen Clark & Co.
“We talked to contractors and property owners, and it seems that in terms of supply, materials are not an issue, but labor is the biggest issue and a real challenge and drives up costs,” said Karen Clark, co-founder and CEO. from the Boston-based disaster modeling firm.
Major hurricanes tend to drive price increases for construction materials and labor as demand increases, resulting in higher costs to repair or replace damaged property, and disaster models include this, she said.
Hurricane Ian caused an estimated insured loss of $63 billion, which includes an estimated increase in demand, according to the KCC. Some increase in demand can be expected, but Ian was not an “extreme” event, Clark said.
Inflation has also contributed to higher reconstruction and replacement costs, experts said.
Insurers continue to push for accurate property valuations from policyholders, and policies may have valuation clauses or restrictions on how they respond in the event of a loss, “based on their view of your values versus your own view,” Weinstein said.
Companies should review their policies and talk to their brokers to determine whether their recorded values are sufficient for the exposure and whether the policy has any limitations, Berscheid said.
“There’s constant dialogue with our insureds and with our agents to make sure we’ve captured the right value and that we’ve provided adequate coverage for what they have and what they own,” said Lindsay Duke, Seattle-based assistant vice president, lead , claims relationship management, at QBE North America.