From flood waters, property damage and pow-er loss to spoiled food, coping with the aftermath of a powerful storm could be very troublesome for real estate owners and operators.During the Atlantic Hurricane season, which officially runs from June 1 through November30, real estate businesses must take a multi-pronged approach to safety. This begins with crisis communications, management and business continuity planning, followed by back-up efforts with the proper insurance coverage.
In 2021, there were 20 separate billion-dollar weather and climate disasters. The total cost for these events was $145 billion, according to the Colorado State University Tropical Meteorology Project. For this year, its team predicts an “above-normal” Atlantic hurricane season with19 named storms, including nine hurricanes, four of which will be major hurricanes.
Taking the proper steps before a hurricane can lessen the impact. Generally, the three main goals of any disaster management plan are to manage the business during the crisis, resume normal operations as quickly as possible and recover losses when it is over. By taking these goals into account when surveying the most critical areas of the business, companies can determine what steps to take to be fully prepared for hurricane season and beyond.
Having a crisis communications, management and business continuity plan in place will help ensure employee stability. Predetermined employee notification channels will be critical to disseminating information. Similarly, understanding individual risk is key to necessary business continuity planning. Try isolating the business risk first. Is it wind, power outage or hurricane damage? Will your business be down for a week, a day or a month? Review your business assets and make sure the most critical operations have built-in redundancy or are covered by insurance.
It’s important to examine insurance policies(and any potential gaps in coverage) in ad-vance with your advisor, as there are a variety of policies to help coastal and non-coastal businesses recover from an event — each involving a different aspect of the restoration.
Business Income Coverage
Review your business income coverage limits, which include loss of income as a result of an event, to ensure they are sufficient. Extra expense coverage often accompanies business income coverage for necessary costs, such as temporarily relocating business operations.
Most business property policies exclude flood coverage. In addition, businesses typically buy minimum flood coverage limits, but don’t con-sider that floods can come from even minor storms or no storm at all.
Note: The Federal Emergency ManagementAdministration (FEMA) has rolled out a new risk methodology for flood insurance pricing called Risk Rating 2.0, resetting flood insurance rates for the first time in decades. As of April 1, this revised rating methodology for National Flood Insurance Program (NFIP), flood policies applies to all policies, new and renewing.
In addition to elevation, the location of machinery and equipment and the cost to rebuild, the new structure accounts for flood frequency, distance from a water source and the likelihood for multiple flood types such as river overflow, storm surge, coastal erosion and heavy rainfall.
What type of deductible do you have on property coverage — percentage or flat? Calendar year or occurrence? If your business has a lot of locations, occurrence or percentage deductibles could be more costly. Additionally, many policies will have lower deductibles for wind and hail events than for a named storm.
Currently, the insurance market is very turbulent with rate increases across the board. Insurance carriers are much more strict regarding inspections and recommendations.
With your insurance advisor, demonstrate why the marketplace should want your business:
- Proactive on safety to reduce claims.
- Proactive on contractual risk transfer.
- Demonstrate property upgrades where possible, i.e., roof, electrical, plumbing, etc.
- Implement outstanding recommendations from previous insurance carrier inspections.
- When implementing risk control measures, first consideration should be given to improvements that have the greatest influence on loss severity.
- Regarding past losses, be prepared to explain corrective actions taken.
Hurricanes can pose a major challenge for the real estate industry. By taking the appropriate steps ahead of time and working with experts ,real estate companies can help to ensure that they can weather any storm. Review your policy with an experienced insurance advisor now.
Hub International Northeast