Maintaining a company’s property is one of the most important parts of running a business. While this area might not necessarily be a revenue-creating aspect of the enterprise – and in many cases it will not be – adequate physical space is crucial for ensuring long-term success for any company. Unfortunately, one of the biggest problems that can destroy an organization’s property comes from natural or man-made catastrophes. Without the right protections in place, a company of any size can quickly find a disruption in production or operations that can derail that year’s budget, or worse, even spell the end for the business.
Costs of catastrophes
As PricewaterhouseCoopers noted, large-scale natural disasters, intercontinental pandemics and financial crises are becoming much more commonplace, with 20 of the world’s 30 most expensive insured catastrophes occurring in the last fifteen years. Each one was a natural disaster except the 9/11 terrorist attack.
With a rise in climate instability, increasing urbanization along coastal cities and an increase in threats due to terrorism, businesses must find ways to minimize their exposure to these catastrophes. However, by their very nature, these risks can be unavoidable and often inescapable. This requires having a plan in place to cover the major costs associated with an unexpected catastrophe.
As noted in the Insurance Information Institute, in the first half of 2015 alone, North America suffered $12 billion in losses due to the natural catastrophes. Of this money, insurers covered the cost of $8 billion. Much of these losses stemmed from the exceptionally cold and snowy winter that hit the northeastern states and Canada, as Boston received a record-breaking 10 feet of snow during January, February and March.
“Losses caused by natural or man-made disasters are expected to double every 10 years.”
Already, Insurance Business America reported that the extreme cold spell that hit the country during the final days of December 2015 is likely to cost insurance companies more than $2 billion. In total, 60 percent of all global insured losses from 2015 happened in the U.S.
Even worse, the III noted that some catastrophe modeling companies are forecasting losses caused by these natural or man-made disasters to double every 10 years due to buildings being more expensive and the steady increase of residential and commercial density.
Responding to catastrophes
No matter how many procedures a company enacts or how many strategies a manager outlines for dealing with a catastrophe, the simple fact is in the overwhelmingly majority of cases, these events will happen. When catastrophes strike, it’s important to have a plan in place for responding to the problems that arise from the event. While each company will have a different plan that deals with the specifics of the particular industry or operations, there are several things that every enterprise should remember.
Sometimes, it’s as important to generate an image of readiness and effectiveness, if only to create a lasting impact on how the general public perceives the company’s image. With the hyperconnected world of the Internet and social media, a business must have a response team in place immediately. An ineffective response to a catastrophe can create a firestorm of negative publicity that can do just as much damage as the actual disaster.
“Helping other victims can engender goodwill and turn a bad story into a positive one.”
Even if there isn’t much the company can actually do in terms of lessening the costs, there are still ways to contribute to a positive response. For instance, merely highlighting the efforts taken to respond to the catastrophe can be go a long way toward letting customers and clients the company is ready to bounce back. In addition, assisting in outreach to help other victims can engender tremendous goodwill and ultimately turn a bad story into a positive one.
Finding the right partners
Brokers who deal with business losses brought on by catastrophes know they need to partner with experienced underwriters. McGowan Risk Specialists (MRS) CAT Property Division is a wholesale brokerage specializing in the placement of All Risk, Wind-Only, Flood, Quake and Mono-Line Terrorism for Small ($5M TIV or less), Middle Market and Large Commercial property schedules. With coverages for wind, terrorism and all other perils, brokers working with MRS can ensure their clients have all the protections they need to help reduce the costs and losses associated with the ever-increasing catastrophes that can strike at any time and without warning.