June 28 is National Insurance Awareness Day, which means it’s a good day to evaluate your insurance coverage and assess your risk.
Triple-I has put together a video to help remind you to review your policies and consider any life changes that might necessitate updating your coverage.
This is also a good time to consider your catastrophe risk. Hurricane season started on June 1st – do you know the storm risk in your area? Do you need supplemental flood or wind insurance? Remember: anywhere that it can rain, it can flood.
A new study by the Federal Emergency Management Agency (FEMA) could be instrumental to its effort to persuade states and localities to adopt up-to-date building codes.
The study, titled Building Codes Save: A Nationwide Study of Loss Prevention, quantifies the physical and economic losses associated with flooding, hurricanes, and earthquakes that have been avoided due to buildings being constructed according to modern, hazard-resistant building codes and standards.
In California and Florida – two of the most catastrophe-prone U.S. states – the study found that “adopting and enforcing modern hazard-resistant building codes over the past 20 years indicate a long-term average future savings of $1 billion per year for those two states combined.”
“The combined savings from these two states demonstrate the high value of adopting I-Codes for hazard mitigation as a return on investment,” FEMA wrote, referring to model construction codes published by the International Code Council.
“This gives us the foundation to back up the recommendations that we’re making,” FEMA building engineer Jonathan Westcott said at a recent conference on flood prevention.
The study is part of FEMA’s broader effort to reduce the growing cost of natural disasters by convincing states and municipalities to adopt post-2000 building codes. Two-thirds of the nation’s localities haven’t adopted recent model codes, Westcott said.
Communities often don’t understand the long-term benefits of adopting stronger codes.
“Instead of just hearing about how expensive it is to add a foot of freeboard,” Wescott said, “they’re going to understand the financial benefits of doing that so they can make a balanced decision on what’s best for their community.”
A natural disaster will strike no matter where you live in the United States. It’s is not a question of if, but when. But if you’re prepared, the damaging impact of a tornado, flood, earthquake or hurricane can be managed.
Alejandro Contreras, Director of Preparedness, Communication and Coordination at SBA’s Office of Disaster Assistance, advised that communications planning is key to a post-disaster recovery strategy. A list of frequently updated contacts should include local media outlets, utility companies and emergency responders. You should also sign up for alerts from FEMA and local public health officials.
Make sure your records are stored electronically off-site (in the cloud) and make sure you have financial records, insurance policy declaration pages, and important contacts.
When reviewing insurance coverage, don’t forget to explore flood insurance. Flooding is the most common and costly natural disaster in the United States, causing billions in economic losses each year. About 90 percent of all natural disasters in the U.S involve flooding. And just one inch of water can cause up to $25,000 in damage, said Contreras. Flood insurance is sold as a separate policy by the National Flood Insurance Program and a growing number of private companies.
It’s important for a business to create a culture of preparedness and make sure employees understand their roles by frequently testing their business continuity plans, concluded Contreras.
The SBA offers low interest long-term disaster loans to businesses. Since mid-March, the agency has distributed about $86 billion in loans for coronavirus-related losses. To apply for a loan or to learn about the requirement visit disasterloan.sba.gov.
Get insured
Loretta Worters, Vice President Media Relations, Triple-I, spoke about being financially prepared for disasters with insurance. To be sure the claims process goes smoothly, take a business inventory listing all assets, she advised. It’s also important to have records of expenses and income.
Worters went over the different types of policies available to businesses and what they usually cover. Property insurance helps protect buildings, equipment, furniture, and fixtures. Business interruption insurance (BI) can help with operating expenses during the period of restoration and includes lost net income (based on financial records), mortgage, rent and lease payments, loan payments, taxes, and employee payroll.
A business may have the option to insure its business property at replacement value or actual cash value, she said, noting the difference is that replacement value coverage can help you replace your property at market prices, whereas actual cash value coverage takes depreciation into account. Replacement value coverage costs more, but it also pays out more in the event of a claim so it’s something business should really consider.
BI is also available for civil authority, such as curfews when businesses have to reduce hours due to government orders.
Utilities service endorsement is available to cover disruption in these services to a business premises.
Worters also noted that, as part of BI, extra expense coverage will cover anything beyond the normal day-to-day operating expenses that is necessary to keep a business solvent, such as renting a temporary place of business while your business is insured or leasing equipment.
In response to an attendee’s question, Worters explained that business income losses are determined based on the business’ profit and the cost of continuing normal operations.
Worters concluded that knowing your risks is an essential element of an overall business plan. While large businesses have risk managers to help make insurance decisions, small-business owners must be their own risk manager but can also get help by consulting with an insurance professional.
Make a recovery plan and test it once a year
Gail Moraton, Business Resiliency Manager, IBHS, cautioned that one out of four businesses that close due to a disaster never reopen, yet 57 percent have no disaster recovery plan. Some small businessowners say they don’t have time or money to come up with a business continuity plan or are in denial that a disaster could wipe them out. Easy-to-use plans and checklists are available from DisasterSafety.org.
Moraton also advised that businessowners get familiar with the likelihood and potential severity of the various risks that could threaten their operations. They range from natural disasters to man-made risks, such as cyber attacks, theft, sabotage, war, and loss of key employees, among many others. Owners also should know their operations and gather information by asking staff to list key functions.
She said employees – the most important asset of any business – should be asked to provide their contact information, emergency contacts, and evacuation destinations.
Businesses need to also have a inventory of their equipment and an understanding of their finances.
Moraton said that once you’ve gathered the key information and have a plan you should update and test that plan every year. Running emergency drills annually will make sure everyone is well prepared in case a real disaster strikes.
Know your hazards
Christopher Cioffi, Commercial Line Engineer, IBHS, provided tips on how to review the hazards in your area by checking on previous years’ severe weather events and reviewing FEMA flood maps. He went over the components of the EZ-PREP plan which includes actions to take before, during and after a disaster.
For example, 72 hours before a hurricane, some of the actions the PREP plan calls for include:
Remove or secure all debris on the property
Review message templates for business’ website, phone recording and employee communications
Take laptops home at the end of each day and confirm they can connect to the business’ server from home
With the 2020 Atlantic hurricane season activity expected to be “well above average” in intensity; three named storms having formed already; and Tropical Depression Cristobal bringing flooding rains and powerful winds from the South to the Midwest as it made landfall in Louisiana, preparedness should be on the minds of everyone who could be affected – and that means more than just people in coastal states.
Cristobal’s low pressure area is forecast to move from the lower Mississippi Valley to the Midwest – just ahead of a cold front that will eventually absorb Cristobal’s remnants as it moves into southeastern Canada, according to Weather.com: “The combination of deep, tropical moisture from Cristobal and the cold front will wring out heavy rain along a swath from the lower Mississippi Valley into the Midwest. Strong winds will also develop in the Midwest and Great Lakes from this setup.”
If Cristobal remains a tropical depression when it crosses into Wisconsin, it would be the first tropical depression on record in the state, according to the National Weather Service in Milwaukee.
“Inland flooding has resulted in more deaths in the past 30 years from hurricanes and tropical storms in the U.S. than any other threat,” said CNN meteorologist Brandon Miller. “Though wind speeds and storm surge are important, and get a lot of the headlines, flash flooding from intense rainfall associated with the storm’s rainbands impact far more people and stretch over a much larger area.”
About 90 percent of all natural disasters in the U.S involve flooding. This is why experts like Dan Kaniewski – managing director for public sector innovation at Marsh & McLennan and former deputy administrator for resilience at the Federal Emergency Management Agency (FEMA) – strenuously urge everyone to buy flood insurance.
If it can rain, it can flood
“Any home can flood,” Kaniewski said in a recent Triple-I webinar. “Even if you’re well outside a floodplain…. Get flood insurance. Whether you’re a homeowner or a renter or a business – get flood insurance. It’s not included in your homeowners policy, and most people don’t understand that.”
Dr. Rick Knabb – on-air hurricane expert for the Weather Channel, speaking at Triple-I’s 2019 Joint Industry Forum – was similarly emphatic:
“If it can rain where you live,” he said, “it can flood where you live.”
He recounted buying a new home, asking his agent about flood insurance, and being told, “You don’t need it.”
“I told him, ‘Get it for me anyway,’” Knabb said.
Flood insurance purchase rates too low
As the Triple-I blog previously reported, 2019 was the second-wettest year on record across the continental U.S., yet flood insurance purchase rates remain low. To illustrate the difference between having and not having flood insurance, Kaniewski described two scenarios related to 2017’s devastating Hurricane Harvey.
“The average [FEMA] payout for the uninsured homeowner in the Houston area was about $3,000,” Kaniewski said. “But if you were proactive and took out a relatively low-cost flood insurance policy…you would have received not $3,000 but $110,000. You’re not going to recover on $3,000, but with $110,000, you’d be well on the path to recovery.”
Unfortunately, he said, even inside designated floodplains, “two-thirds of homeowners do not have flood insurance.”
The 2020 Atlantic hurricane season activity is projected to be “well above average,” according to Triple-I non-resident scholar Dr. Phil Klotzbach.
Dr. Klotzbach, an atmospheric scientist at Colorado State University (CSU), and his team issued an updated forecast on June 4. They project the 2020 Atlantic hurricane season will have 19 named storms (including the storms that already formed), 9 hurricanes, and 4 major hurricanes.
Probabilities for at least one major (category 3-4-5) hurricane landfall on each of the following coastal areas are:
1) Entire continental U.S. coastline – 70 percent (average for last century is 52 percent)
2) U.S. East Coast, including Peninsula Florida – 46 percent (average for last century is 31 percent)
3) Gulf Coast from the Florida Panhandle westward to Brownsville – 45 percent (average for last century is 30 percent)
The probability for at least one major hurricane tracking into the Caribbean (10-20°n, 88-60°w) is 59 percent (average for last century is 42 percent).
An early forecast had predicted eight hurricanes. A typical year has 12 named storms and six hurricanes — three of them major. Major hurricanes are defined as Category 3, 4, and 5 storms, where wind speeds reach at least 111 miles per hour.
The active 2020 season is partly due to a warmer than normal eastern Atlantic, which is typically associated with more active Atlantic hurricane seasons. Tropical Storms Arthur, Bertha and Cristobal have already formed in the Atlantic as of June 2nd.
“It is important to recognize that these forecasts are not perfect,” said Klotzbach. And even when correct “we can’t say when or where these storms are going to track or if a significant hurricane is going to make landfall.”
“The general public needs to remember that it only takes one storm to make this an active season for you. So now is the time to get the hurricane preparedness kit together so that you will be ready when and if storms threaten,” he concluded.
Take steps to mitigate risks for your home and business – make simple repairs/clean-up of property.
Gather emergency supplies (have a minimum seven days of non-perishable food, one gallon of drinking water per person per day, and medications for all family members).
Take an inventory of your personal property – photos of possessions will make it much easier to file an insurance claim after the storm.
Review your homeowners, auto and business insurance coverage with your insurance professional to ensure you have appropriate coverage in case of loss.
If you don’t already have it, ask your insurance professional about adding flood coverage to your home or business policy. Flood damage is excluded under standard homeowners and renters insurance policies and ninety percent of natural disasters involve flooding. You don’t need to live in a flood zone to incur flood damage from a storm.
Prepare evacuation routes well ahead of time. Make sure you know how to quickly and safely escape your area if emergency management officials issue evacuation orders.
Don’t forget about your pets. When evacuating, many residents leave their pets behind because they have no place to take them. Make sure your local shelters will accept pets and gather information on hotels and motels that allow pets in guest rooms.
Another wildfire season has begun. Almost 4.5 million U.S. homes are at high or extreme risk of wildfire, with more than 2 million in California alone.
Residents of wildfire prone areas and just about anyone who is seriously concerned about the dangers posed by wildfire could benefit from the National Fire Protection Association‘s webinars on how to prepare to defend against the destructive threat of wildfire.
A recording of the May 6 webinar on financial preparedness can be viewed here.
The presenters were Nicole Mahrt-Ganley, American Property
Casualty Insurance Association, and Janet Ruiz, Insurance Information Institute
(Triple-I). They offered guidance on how to read a homeowner’s insurance
policy, understand policy deductibles, and the factors to consider when
determining how much insurance coverage to purchase.
Ruiz and Mahrt-Ganley discussed how insurers assess a home’s
risk to wildfires through sophisticated technology and on-site inspections as
well as the ways an insurer calculates homeowner’s insurance premiums based on
the home’s loss history, location, age, size, and its construction type and
quality.
They also provided tips on how to develop an inventory of a
household’s personal possessions, steps to take if a homeowner’s insurance
policy is non-renewed, and how to navigate the insurance claims process.
The National Oceanic and
Atmospheric Administration (NOAA) has predicted an
above-normal hurricane season in terms of the total number of storms. Its
2020 Atlantic
Hurricane Season Outlook calls for
13-19 named storms, 6-10 hurricanes, and 3-6 major hurricanes.
This year, the COVID-19 pandemic
adds a layer of difficulty to hurricane preparedness, particularly when it
comes to evacuation plans. Florida state officials
anticipate the challenge of preparing shelters with social distancing measures
in place and have asked FEMA for guidance. New Orleans is advising residents to plan to include hand sanitizer and face
coverings in their emergency home kits and go-bags.
Likewise, the impending hurricane season subjects managing
pandemic response and reopening the economy in its wake to additional uncertainty.
The European Commission should create a European Union-based
resilience framework to provide insurance cover for catastrophes, such as
pandemics and huge cyberattacks, the Federation of European Risk Management
(FERMA) said Tuesday.
Reuters
reports that the proposed framework would involve public-private
partnerships and could respond to events that create hefty business losses
without physical damage.
Commercial prices climb
Prices for commercial insurance are rising at rates not seen
for almost two decades, compounding pressure on businesses that are already
struggling to deal with the coronavirus crisis, The
Financial Times reports. Industry experts say that prices for some
types of cover are doubling as insurers attempt to repair some of the damage
the crisis has inflicted on their balance sheets.
Insurers are facing a double hit from coronavirus, the FT
says. Claims from customers could pass $100 billion in total, while there has
also been a hit to reserves from volatile financial markets.
French ruling puts coronavirus claims on global menu
Reuters
reports that AXA will meet the bulk of business interruption claims from
some restaurant owners in France after losing a court case seen as a potential
precedent for coronavirus-related disputes across the world.
A Paris court ruled last week that AXA should pay a
restaurant owner two months of revenue losses caused by the virus pandemic. AXA
had argued its policy did not cover business disruption caused by the health
crisis.
The National Oceanic and Atmospheric Administration (NOAA) predicts an above-normal hurricane season in terms of the total number of storms. NOAA’s 2020 Atlantic Hurricane Season Outlook calls for 13-19 named storms, 6-10 hurricanes, and 3-6 major hurricanes.
An early forecast by Colorado State University predicted 16 named storms, 8 hurricanes, and 4 major hurricanes for the year, with above-average probability for major hurricanes making landfall along the continental United States coastline and in the Caribbean. The Colorado State team, led by Triple-I non-resident scholar Dr. Phil Klotzbach, will have an updated forecast on June 4.
The Atlantic hurricane season runs from June 1 through
November 30.
Hurricane preparedness during the COVID-19
pandemic
This year the COVID-19 pandemic adds a layer of difficulty
to hurricane preparedness, particularly when it comes to evacuation plans. Florida
state officials anticipate the challenge of preparing shelters with
social distancing measures in place and have asked FEMA for guidance. New
Orleans is advising
residents to plan to include hand sanitizer and face coverings in their
emergency home kits and go-bags.
As an alternative to emergency shelters, this P/C 360 article
suggests that those who are able to do so should plan to stay with friends or
relatives or secure a hotel room at least 100 miles inland from their home.
Hurricanes can strike with little advance warning so it’s vital to prepare.
Protect yourself and others when filling prescriptions by limiting in-person visits to the pharmacy. Sign up for mail order delivery or call in your prescription ahead of time and use drive-through windows or curbside pickup, if available.
If you need to evacuate, prepare a “go kit” with personal items you cannot do without during an emergency. Include items that can help protect you and others from COVID-19, such as hand sanitizer or bar or liquid soap if not available, and two cloth face coverings for each person. Face covers should not be used by children under the age of 2. They also should not be used by people having trouble breathing, or who are unconscious, incapacitated, or unable to remove the mask without assistance.
When you check on neighbors and friends, be sure to follow social distancing recommendations (staying at least 6 feet, about 2 arms’ length, from others) and other CDC recommendations to protect yourself and others.
If you need to go to a disaster shelter, follow CDC recommendations for staying safe and healthy in a public disaster shelter during the COVID-19 pandemic.
On May 14 the Insurance Information Institute (Triple-I), co-hosted a
webinar with ResilientH20 Partners that focused on managing
extreme weather events in the midst of the COVID-19 pandemic. The panelists discussed
the changing role of stakeholders across the private sector, governments and
non-profit/NGOs.
The panelists drew from their backgrounds across government, business and insurance to discuss the immediate challenges stemming from the COVID-19 pandemic, the downturn in the economy, and near-term flood and storm threats.
Dr. Michel Léonard,
Vice President & Senior Economist, Triple-I
Richard Seline,
Managing Director, ResilientH20 Partners
Panelists:
Dr. Daniel Kaniewski,
Managing Director, Public Sector Innovation, Marsh & McLennan
Jeff Moseley, CEO,
Texas Association of Business
Katie Sabo, State and
Local Leader, Managing Director, Public Sector Partnership, Aon
Moderator:
Chris Tomlinson,
Business Columnist, Houston Chronicle
Some of the key
takeaways include:
Having
a business continuity plan is a must-have for any business
Flooding
can occur anywhere (not just high-risk zones) – so getting flood
insurance is crucial
In
the midst of the pandemic, we can’t lose sight of the importance of investing
in mitigation and resilience, which will help on a material level post-event
The
COVID-19 crisis is putting unprecedented pressure on local governments – if private
investors have ideas for disaster mitigation, especially ones where return on
investment can be shown – now is the time to bring them, and they will be heard
Insurers
are and will be playing bigger roles in partnering with local governments to
build public/private solutions to disaster resilience
This
webinar is the first in a new series of thought leadership sessions that aims
to be a catalyst for public-private-partnerships focused on enhancing
pre-disaster risk mitigation at each step of the resilience value-chain, from
financing to development, management, technology selection and
crisis-management.
The Atlantic
hurricane season starts on Monday, June 1, but could get an early start this weekend with Tropical Storm Arthur.
Severe convective storms—tornadoes, hail, drenching thunderstorms with lightning, and damaging straight-line winds—are among the biggest threats to life and property in the United States. They were the costliest natural catastrophes for insurers in 2019, and this year’s tornado season is already shaping up to be the worst in nearly a decade.
A new
Triple-I paper describes how population
growth, economic development, and possible changes in the geography, frequency,
and intensity of these storms contribute to significant insurance payouts. It
also examines how insurers, risk managers, individuals, and communities are
responding to mitigate the risks and improve resilience through:
Improved
forecasting,
Better
building standards,
Early
damage detection and remediation, and
Increased
risk sharing through wind and hail deductibles and parametric insurance
offerings.
The 2020 tornado season coincided with most of the U.S. economy shutting down over the coronavirus pandemic. This could affect emergency response and resilience now and going into the 2020 hurricane season, which already is being forecast as “above normal” in terms of the number of anticipated named storms.
