On August 9, the National Oceanic and Atmospheric Administration (NOAA) released an updated forecast for the 2012 Atlantic hurricane season. While its initial outlook, released in May, predicted 9 to15 named storms during the season (June 1 through November 30), NOAA is now forecasting 12 to 17 named storms, including five to eight hurricanes. These predictions include the six named storms (including two hurricanes) recorded to date.
Even if forecasts prove inaccurate and 2012 ends up being a less active season, it is important for organizations to be prepared for the prospect of a windstorm or other natural disaster. An active hurricane season, as seen to date in 2012, can lead to little damage, while a technically “low activity” season can include high losses.
Hurricanes and other catastrophic events can cause significant loss of life, and stress many organizations’ operations, personnel, business models, balance sheets, and equity. Greater complexity and interconnectedness in global supply chains and other interdependencies mean that an organization does not have to be in a storm’s direct path to suffer a major loss.
As the 2012 Atlantic hurricane season continues, it is critical that organizations re-evaluate their exposures, consider potential losses, and minimize the impact a storm might have on their operations and those of their customers and suppliers.
Before a Storm
Before a storm approaches, organizations should review their crisis readiness and supply chain vulnerabilities, analyzing current capabilities, organizational needs, and emerging risks (both internal and external). If they have not already done so, organizations should establish crisis management structures and protocols around a broad set of contingencies.
Specifically, organizations should:
- Review property insurance policies: Ensure that you understand policy limits, sublimits, deductibles, loss-reporting requirements, covered perils, and any other restrictions.
- Evaluate property loss control and property security: Identify locations (including those of customers and suppliers) that might be exposed to direct or indirect hurricane damage, ensuring that storm-monitoring systems are operating effectively, and identify security and repair resources that may be needed after the storm.
- Evaluate business continuity, emergency response, and crisis management plans: Ensure they are current and appropriate to the crisis, and that they activate related committees and protocols and verify suppliers’ plans and capabilities;
- Plan for employee safety: Review and update employee evacuation and notification plans and contact lists, ensuring that employees are aware of emergency policies and procedures, and arrange for employees to work remotely when necessary.
- Evaluate claims preparation and management issues: Review and update procedures and responsibilities for gathering and processing claims information, securing and duplicating financial records at water- and wind-protected sites, and meeting with insurers to set claims management protocols.
More information on these and other steps is available in Marsh’s Hurricane Preparedness and Response Checklist. Risk managers should also read Marsh’s recent point of view on claims lessons learned from the catastrophes of 2011.
During a Storm
During a storm, organizations should activate, as warranted by the severity of the event, their real-time crisis management plans. This should include engaging expert guidance to support and manage corporate response, while protecting brand and reputation and managing the supply chain.
To better ensure their safety, those employees remaining at a work location should not go outside—even if the “eye” should pass over their specific location, until a determination has been made that dangerous conditions have ceased and proper site evaluations have been conducted.
After a Storm
After the storm has passed, organizations should identify and manage immediate hazards such as downed electrical lines, leaking gas, or flammable liquids. Security and fire protection systems should be restored, and salvage operations should begin as soon as it is safe.
In terms of employees, organizations should verify their health and safety and initiate employee assistance programs as required.
Organizations with suppliers in the affected area should determine the viability of those suppliers and look to their alternative suppliers to meet product or service demand, as needed.
In the event of a loss, it is imperative to notify insurers as soon as possible and establish communication between employees, insurers, and claims professionals. Risk managers should identify and capture all costs associated with an insurance claim. Examples include: protection and preservation, temporary repairs and replacement, and extraordinary and expediting expenses.
Organizations should also take photographs or videos to depict damage, quarantine critical pre-loss information, back up computer files, and relocate copies to a separate site.
Businesses should not overlook the potential for flooding—which can cause greater financial and social damage than other aspects of the storms that produced them—which may not be a covered peril listed in a property policy. The impact of floods, like other natural disasters, can be lessened by an effective emergency plan and flood control measures.
When flooding is forecast, organizations should assemble their flood emergency teams and review guidelines for ensuring functionality of gates and drain valves, protect basement ramps and doors, relocate hazardous materials, and deactivate or relocate critical electrical equipment.
More information how to prepare for and respond to a flood is available on our Disaster Revovery portal.
Supply Chain Resiliency
Even after repeated wakeup calls from 2011’s catastrophes, many organizations still lack complete visibility into their supply chains and remain vulnerable to the next disaster.
To build more resilient supply chains, organizations need to adopt an approach focused on an organization’s total exposure, including non-physical perils, that is aligned to the value that an organization derives from key products or other sources of revenue. This approach, which relies heavily on the use of analytics, can help an organization identify single points of failure in its supply chain along with risk mitigation and financing options.
For more information, read Marsh’s recent whitepaper on supply chain resiliency.
How Marsh Can Help
Marsh’s property risk, forensic accounting, business resiliency, and crisis management experts are available to assist clients with both pre- and post-event concerns. If you have business interests in potentially affected areas, would like assistance with property inspections or a review of your business resiliency planning, or have questions regarding your insurance coverages, please contact your local Marsh relationship manager or call:
- The Marsh Catastrophe Hotline at +1 866 252 7492; or
- Marsh Risk Consulting’s hotline at +1 212 345 9589 (+1 866 928 7475 within the U.S. and Canada).
Marsh’s local dedicated claims teams and client executives can also support clients in their business recovery in the event that they are affected by a hurricane or other disaster. The local teams are supported by our regional and international claims experts, including specialists in large or complex claims. To file a claim, contact your client executive or send an email to the appropriate address listed below:
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