Are businesses prepared for another Superstorm Sandy?

As the tenth anniversary of Superstorm Sandy approaches, it is important to take a look back at this devastating storm with an eye on how businesses can better prepare for future extreme weather events.

With a monumental diameter of around 900 miles at its greatest extent, Superstorm Sandy was the deadliest windstorm to occur in the north-eastern U.S. for 40 years and is the third costliest hurricane in U.S. history (after Katrina in 2005 and Ida in 2021). It incurred around $30 billion in insured losses and over $60 billion in economic damages. But the human cost was even more devastating — more than 280 people died, including at least 54 direct deaths in Haiti and over 70 in the U.S. Many thousands were left without shelter.

In the aftermath of the storm, Allianz handled around 900 customer claims, ranging from damaged cargo to flooded premises, and estimated the total impact at the time to be $590 million.

With hurricanes, the primary sources of damage are from high winds and storm surge. Many companies did make improvements to address these sources following Sandy. Despite such measures, most companies are still not fully prepared for the effects of these storms.

Five steps to boost storm resilience

By putting the following procedures in place, businesses can have a better chance of withstanding and recovering from an extreme weather event:

1. Update and test your emergency preparedness plans: Preparation before the storm minimizes property damage and reduces business interruption. Ensure your business has a comprehensive written emergency response plan for extreme weather events, including high winds and floods. A good plan has the support of senior management, site-specific recommendations and clear delineation of responsibilities.
2. Test and update business continuity plans annually: The crucial role of business contingency plans has become more apparent as a result of recent natural catastrophes. Superstorm Sandy hit the Northeast on a Monday, which made it difficult for employees to develop and 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.
3. Understand your insurance policy: Business owners should take the time to read their current policy and discuss with their brokers what is covered and where there may be gaps. Determine if 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 coverage to support the business until it returns to its pre-loss financial condition.
4. Know what to prepare for: Planning for a wind event involves different preparation than planning for flooding. In the case of Superstorm Sandy, the majority of preparation was based on a high wind event, leaving many businesses unprepared for the flooding caused by the storm surge. As more sophisticated tracking models are introduced, more accurate information will be available.
5. Consider making improvements to the building and site: The following enhancements could help your business withstand the high winds and flooding that can accompany a windstorm:

1. Emergency generators for loss of power.
2. Floodgates and flood doors.
3. Raising critical equipment above the highest anticipated flood levels.
4. Protecting the building ‘envelope’ from high winds (this refers to the physical boundaries between the interior and exterior of a building, such as the roof, windows and doors). This could include measures such as using impact-resistant doors and glass, or providing additional securement of the roof covering system to the roof deck.

The question is not whether an extreme weather event will affect a business but when. Extreme weather event losses will continue to rise with climate change, higher property and asset values, more complex supply chains and changes to exposures (such as increasing economic activity in natural catastrophe zones). Soaring inflation will only challenge claims costs further. Property and construction insurance claims, in particular, are exposed to higher inflation, as rebuilds and repairs are linked to the cost of materials and labor, while shortages and longer delivery times inflate business interruption values.

Something is changing across the globe in terms of the types and severity of losses we are seeing. Until Hurricanes Fiona and Ian in September, the 2022 hurricane season had gotten off to a very quiet start, but we still expect to see another above-average season, with forecasters predicting up to 10 hurricanes in the Atlantic. Businesses have a responsibility to their customers, shareholders, and stakeholders to mitigate this risk.

Thomas Varney is the North American regional manager of Allianz Risk Consulting at Allianz Global Corporate & Specialty. Based in Chicago, Varney has been part of Allianz Risk Consulting since 2011. 

Opinions expressed here are the author’s own.

Related:

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• Hurricane Ian might not ‘crater’ Florida’s insurance market, but here’s what to expect
• 10 things you should know about adjusting flood claims