5 things businesses can do now to prepare for hurricanes

As the magnitude of the losses from Hurricane Sandy became apparent shortly after the storm, questions immediately began to circulate as to why the losses were so high and whether this event would be the “new normal.” Five years after Sandy, Hurricanes Harvey, Irma and Maria have confirmed those fears.

According to the 2018 Allianz Risk Barometer, in 2017 there was approximately $330 billion in overall losses from natural catastrophes. At least $90 billion of that total was from the three category 4+ hurricanes — Harvey, Irma, and Maria — that wreaked havoc in September, making 2017 the costliest season on record.

Allianz has identified five steps businesses can implement now to be better prepared for the 2018 hurricane season and beyond:

1. Test and update emergency preparedness plans

Preparation before the hurricane is the key to minimizing property damage and reducing business interruption. Allianz recommends that every business located in a hurricane-prone area have a comprehensive, written emergency response plan that is reviewed and tested annually.

A good plan has the support of senior management, has a clear delineation of responsibilities among multiple teams — communications, IT, supply-chain risk management, compliance, production, and facilities, for example — and spells out site-specific activities to complete before, during and after a hurricane.

And a good plan will enable the business to quickly implement measures after the disaster to restart production as quickly as possible and to limit business interruption losses.

2. Understand what events to prepare for

Planning for a hurricane involves understanding your facility's susceptibility to high winds, storm surge and inland flooding. Your facility may be susceptible to all three or only one.

Preparing for flooding can be very different from preparing for high winds. The majority of preparations for Hurricane Sandy were based on a high wind event, leaving many businesses unprepared for the flooding. The National Weather Service now issues storm surge watches and warnings to areas that have a significant risk of life-threatening inundation from a tropical storm or hurricane.

The recent events in Southeast Texas during Hurricane Harvey illustrate the danger of massive urban flooding due to overdevelopment. According to a recent Allianz report, the value of insured property within the U.S. located in a coastal county is $13 trillion, so it stands to reason that the exposure is huge. In order to protect coastal communities, zoning laws are needed to prevent unbridled overdevelopment, along with less concrete and more green space to allow tropical rains to properly drain. For example, some areas of Houston received about half the amount of rain from Harvey compared with the record-setting deluge of 154 centimeters (60.6 inches) in Nederland, Texas, but experienced much worse flooding. The difference is overdevelopment.

Hurricane Irma, while packing a lot of rain, caused much more wind than water damage when it slammed into South Florida. No two storms are the same, so businesses must mitigate against every possible scenario.

3. Review and update business contingency plans

The crucial role of business contingency plans has become increasingly apparent as we investigate recent hurricanes, wildfires, mudslides and floods. Sandy hit the Northeast on a Monday, which made it difficult for employees to implement business contingency plans while preparing their homes and families for the storm.

A well-developed contingency plan provides businesses with the tools to get back up and running as quickly as possible. Even if your facility sustains minimal damage from a hurricane, the operations may be interrupted by power outages and accessibility issues. A good plan shouldn't be a static, “write it and shelve it” document; it must be tested, table-topped and tweaked. That's where business continuity planning turns into business continuity management.

In the event of a disaster like Hurricane Harvey, which has been termed a “once-in-a-thousand-year” event due to unprecedented rainfall and flooding, interruption of normal business activities could have been significant for any company.

4. Understand your property insurance policy

Business owners should take the time to read their current policy and discuss with their brokers what's covered and where there may be gaps. Determine whether the limits of liability are in line with the current dollar value of the cost to repair or replace the damage. Consider adding an extended period of indemnity clause to the business interruption (BI) coverage to support the business until it returns to its pre-loss financial condition.

During Harvey, claims adjusters anticipated business interruption losses to far outpace actual property damages. BI can be so devastating that many businesses that aren't able to resume operations within a few days of a disaster go out of business within a month.

5. Make improvements to the building and site

There are a number of improvements that can be made to the physical structures and to the site that allow a business to withstand the high winds and flooding that may accompany a hurricane. Some of the more effective improvements include the following:

Employ emergency generators for loss of power.
Install flood gates and flood doors for important buildings.
Raise critical equipment above highest anticipated flood levels.
Protect building envelope from high winds (roof, windows and doors).

Businesses should take advantage of the calm before the storm to ensure that they're ready for any eventuality — just in case.

Andrew Higgins, P.E., is Technical Manager — Americas, Allianz Risk Consulting, LLC, Alliance Global Corporate & Specialty Americas. He can be reached at [email protected].

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