Losses in business disruptions, a common source of claims after major events, could increase significantly after Hurricane Ida, depending on how long it takes to restore power to New Orleans and southeastern Louisiana, experts say.
Hurricane Ida, which landed near Port Fourchon, Louisiana, on August 29 as a strong Category 4 storm, with a maximum sustained wind of 150 miles per hour, took out eight transmission lines that supplied power to New Orleans. A transmission tower collapsed and sent power lines to the Mississippi River.
Although progress has been made in restoring power to certain areas, including parts of New Orleans, as of September 6, there were 568,000 outages that still affected homes and businesses in Louisiana, according to the U.S. Department of Energy. As a result, many were without access to basic services such as water and gas. disaster model AIR Worldwide, a Verisk Analytics Inc. company, said in a note on Friday.
"The challenge of whether the power will be restored in the coming weeks and how long (it takes) will affect the tail of this loss and whether it will increase significantly due to business interruptions," says Martha Bane, Glendale, California-based Managing Director of Real Estate Practice in North America at Arthur J. Gallagher & Co.
Many commercial facilities may have sustained some level of damage but not enough to close down, Bane said. "It is the lack of power that will keep them closed, possibly for several weeks," she said.
In New Orleans itself, there was more wind damage than flooding, but outlying areas saw extensive flood damage. "We've seen everything from massive roof damage to extreme flooding over manufacturing, government units, real estate ̵
The longer the power is off, the longer the damages period is to be from a business breakdown point of view, says Rob Gall, Sacramento, California-based property damage manager at Marsh LLC.
Long-term power outages can create many problems for manufacturing and facilities that cannot start, he said. "It is a total disturbance while the power is off. If they can not come in and do the cleaning, it also increases the side of the physical damage. Not having electricity, not having water is a big issue, he says.
In this case, there will be several reasons why loss interacts at the same time, says Tom Carstens, senior vice president of global technical services at Crawford & Co. in Atlanta.
“Companies can have direct damage. They may have power outages outside the premises. there is an influence from civil authority. There are currently also input / output problems, says Carstens. Various insurances are available for recovery from these multiple causes of loss, and power outages outside the premises are one of them, he said.
Most large commercial policyholders will have a service outage or insurance outage, says Maryann Johnson, Philadelphia-based CEO, Real Estate and Energy Requirements, at Beecher Carlson Insurance Services LLC, a unit of Brown & Brown Inc.
Normally, coverage has a sublimity in dollars and a daily limit, and there are usually waiting times anywhere from 24 to 72 hours, she said.
"Most day limits will be 30 days, and if the power outage were to last longer than 30 days, there would be no more coverage if that was the only problem at that facility," Johnson said.
Shops, hotels, residential facilities and research activities will try to secure rental generators to get some power to mitigate damage, she said. "From an additional cost standpoint, property protection and preservation can increase costs," she said.
The service break is nuanced and coverage triggers vary depending on policy, Gall said. "Some insurances require only an unintentional event, which is a hurricane or storm damage, but some insurances may have distance limitations" which require that the physical damage to the electricity supplier's facilities be within a certain number of miles of the policyholder's premises, he said
Some policies excludes losses caused by damage to certain types of equipment, such as transmission and distribution lines. A company "may have service outages coverage, but the trigger may apply depending on each client's specific circumstances," Gall said.
Prolonged power outages are likely to amplify the commercially insured losses due to business outages and additional property damage that may occur due to inability to make timely repairs, said David Smith, senior head of science and analysis at CoreLogic Inc. in Irvine, California, in an email.
"The more significant this issue becomes, the higher the probability that the losses will enter the higher part of our intervals," says Smith.
Insured flood and wind losses from Hurricane Ida are estimated at between $ 14 billion and $ 21 billion, according to CoreLogic's estimates released on September 1. .
"Some specific damage in the New Orleans area may prolong the power outage for longer than normal and we will see what it looks like in terms of how quickly they can recover," says Carstens. d.
There is always a great demand for contractors to carry out the restoration, which can further extend the time to complete the repairs for any direct damage or (damage to) the transmission lines and the power supplies that support a company, he said. Catalog