Marsh Offers Pre- and Post-Loss Mitigation Tips for Businesses

May 27, 2010

With the National Oceanic and Atmospheric Administration (NOAA) predicting an “active to extremely active” hurricane season, insurance brokerage giant Marsh is recommending several pre and post-loss risk mitigation strategies to help buisnesses and risk managers weather the storm season.

NOAA is projecting a 70 percent probability of 14 to 23 named storms, eight to 14 hurricanes, and three to seven major hurricanes (category 3 or higher) in the Atlantic this hurricane season. NOAA’s forecast of an active season is consistent with other 2010 forecasts of hurricane activity.

According to the U.S. Census Bureau, approximately half of the U.S. population lives within 50 miles of a coastline. As the aggregation of population in coastal areas continues, and exposed property values and infrastructure increase, the total losses from hurricanes and other named storms will increase. At-risk industries include commercial real estate, hospitality, and public entities. The energy industry is also vulnerable, but has managed prior catastrophes, such as Hurricane Ike, relatively well.

Recent events — flooding in multiple U.S. states, earthquakes in Latin America and Asia, a volcanic eruption in Iceland, and the Gulf of Mexico oil release —are reminders that catastrophic events can have a compound effect on the property insurance market, impacting available capacity and pricing.

Specifically, Marsh recommends the following pre-loss and post-loss measures.

Pre-Loss Measures

  • Establish a catastrophic response team, which should include representatives from risk management, engineering, finance, human resources, legal, public relations and security, as well as a broker claims consultant and forensic accountant.
  • Reconfirm or establish objectives of claim loss management plans with a broker claims representatives and — if one is assigned — an account adjuster. If no adjuster is assigned, clients should promptly come to agreement with their insurer(s) on plan objectives.
  • Conduct catastrophe modeling, which can assist in evaluation of potential financial losses and setting or review of sublimit adequacy.
  • Consider impact scenarios and develop decision models to understand and manage emerging threats related to hurricanes.
  • Develop and regularly update business continuity and disaster recovery plans and procedures.
  • Review supply chain management procedures to understand and minimize exposures related to suppliers, and consider alternative routes to market if traditional transportation methods could be disrupted.
  • Complete up-to-date business interruption and property damage valuations by location.
  • Ensure proper compliance with building codes.
  • Develop properly worded and tested claims procedures.

Post-Loss Measures

  • Arrange forensic accounting services to measure losses and prepare the financial metrics necessary to file a claim.
  • Secure the assistance of a claims advocate from an agent or broker to prepare and manage the presentation of claims to underwriters.
  • Secure preferred contractors to assist in necessary repairs following an event.

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Source: Marsh

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