Catastrophe planning: Preparing for the unexpected

Business owners have faced a myriad of challenges in recent years in planning for catastrophes, natural disasters and extreme weather events, and the spotlight has been thrust on the importance of remediation, repair and recovery during the aftermath of such calamities.

The value of qualified claims professionals with technical talents and loss adjusting skills became particularly pronounced in 2017, when two major hurricanes made landfall within weeks of each other in Texas and Florida. Hurricane Maria landed a catastrophic blow to Puerto Rico shortly thereafter. In fact, the 2017 hurricane season went on to become one of the worst on record with insured losses from hurricanes Harvey, Irma and Maria estimated at $92 billion.

Destruction continued this past year when Hurricane Michael pounded Floridian business owners and residents in the panhandle region. The October storm racked up another $16 billion in overall losses.

The need for property loss adjusters was magnified again by the scope and intensity of the California wildfires in November. Northern California’s “Camp Fire” produced overall losses estimated at $16.5 billion. In addition to lives lost, many saw their homes, businesses, and possessions ravaged by flames in a matter of moments.

A catastrophe plan

While images of hurricanes and wildfire destruction have dominated recent headlines and screen coverage, business owners cannot afford to ignore other types of catastrophes and exposures that can wreak havoc on a widespread basis. Winter weather conditions can create property damage arising from excessive snow accumulation and icy conditions. In many parts of the country, this is quickly followed by the spring storm season and the tornadoes, hail storms and floods that can accompany the warmer weather. Moreover, earthquakes in certain seismic zones cannot be ignored. The ongoing possibility and threat of these types of exposures underscore the need for businesses and organizations to review and update their existing catastrophe plans.

Having responded to numerous storms and natural disasters, loss adjusters and property claims professionals can aid this planning process and share important insights in how to mitigate damage arising from future events. They recognize no two events will ever be alike and similarly, business needs and objectives vary considerably.  As a result, catastrophe plans should be easy to understand and adaptable to any situation. One way to approach the review and update of an existing plan or the development of a new plan is to think in terms of three P’s — the plan, the process and the people.

The plan

A catastrophe plan should be developed well in advance of any occurrence with ample time for testing, modification and updates as needed. It should consider specific risks and exposures unique to the business. As a part of this process, business owners are encouraged to review their insurance program, ensure they understand the coverage that has been secured, and how policies would respond in the event of an accident. It is unfortunate when businesses learn their coverage was not as broad as intended, excluded certain risks believed to be covered, or does not reflect the addition of a new location on the property schedule.

Moreover, a catastrophe plan should be well-written and document important elements of the plan including identification of emergency response team members, communication procedures, repair and recovery resources, and business continuity strategies. While such a plan should be comprehensive in scope, it should also be easy to grasp and actionable by others. During an actual crisis, there is little time to be read a plan and reaction should be instinctive and second nature. The expansiveness or succinctness of the plan will vary among organizations depending on each of their needs and objectives. It is also important that the plan remain fluid and flexible as events vary and there will be exceptions to every plan.

The process

A catastrophe plan should contain well-defined procedures and processes. Business owners need to know how to mitigate risks and protect property, and a well-crafted plan will outline steps to take before, during and after a loss event. Effective plans often contain checklists, protocols and procedures that are documented and easy to grasp.

A plan should also contain the contact information of emergency response team members, where to locate copies of insurance policies, procedures needed to file a claim, and a listing of remediation, restoration and repair resources along with any pre-established service agreements. It can be helpful to identify equipment that is needed to restore operations or an alternative location where business can be conducted while repairs take place.

The value of establishing trusted relationships with quality providers prior to a loss event cannot be overstated. Once a disaster hits a particular area, many businesses scramble and compete for limited resources to mitigate damage and restore operations. It is important to have relationships and service agreements established ahead of time.

Sound processes and procedures are designed to enable ordinary actions to take place during extraordinary times.

The people

People are the most important element of any catastrophe plan. They are the ones who must creatively develop a plan based on specific needs and objectives and execute the plan when any loss event or catastrophe occurs. Well-crafted plans incorporate input from a diverse range of talents and perspectives. This includes observations from internal personnel as well as external service partners. Insurance companies, agents and brokers; third-party administrators and loss adjusting companies; and resource and service providers offer a broad base of invaluable experience. Roles and responsibilities of each of these individuals or organizations should be clearly defined and agreed upon before any loss event.

Businesses will find it valuable to put together an emergency response team. These are highly respected and motivated leaders onsite who understand operations and can respond to emergency situations.  They should have an integral role in establishing the catastrophe plan and ensuring it remains up to date.

In the face of a disaster, the emergency response team will be responsible for implementing and overseeing the execution of the plan. These members should have access to the catastrophe plan at all times and their contact information should be readily available. Communication among this group is critical and contingency plans should be made should internet, mobile phone or telephone services be disrupted. They are often the individuals responsible for working with loss adjusters and claims professionals and oversee recovery and restore operations.

Planning for the inevitable

For most businesses, it is not a matter of if a disaster will strike but when such an event will occur. Preparation for natural disasters, catastrophes and extreme weather events are a business’ best defense against the damage these loss events can produce.

It is important to have a well-crafted catastrophe plan that can be easily accessed and executed by an organization’s emergency response team. Communication and response procedures should become second nature during a time of crisis. Businesses should have important contact information and know-how to file a claim. It is the response of internal team members and external service partners that will guide a business during these dark times and lead the organization back to the road to recovery.

Having a strong insurance program in place that provides broad coverage and protection against specific risks and exposures is essential. It is important to know what protection specific policies will provide and how policies will respond in various situations. Insurance agents and brokers can be valuable during this phase of the assessment and preparation process.

Similarly, it is important to identify and establish relationships with quality service providers prior to a loss event ever taking place. Pre-arranged service agreements that provide resources for remediation, restoration and repair can be critical at a time when others are competing for limited resources and recovery solutions. Loss adjusters, property claims professionals and other service providers can share valuable insights based on their prior experience and response.

Why take chances – update or prepare your catastrophe plan today.

Thomas Simoncic (tom.simoncic@sedgwick.com) is president, Property Americas for Sedgwick.

For more information:

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