Publication | BRG
What Businesses Can Do to Prepare for Hurricane Season 2022 and Understand Their Business Interruption Coverage
The 2022 Atlantic hurricane season is predicted to deliver a round of above-normal storms for the seventh consecutive year, according to an outlook the National Oceanic and Atmospheric Administration (NOAA) released on May 24.
The NOAA predicts fourteen to twenty-one named storms and six to ten hurricanes, and three to six of those will develop into major hurricanes. The hurricane season goes from June 1 through November 30. A major hurricane is Category 3 or higher (winds at 111-plus miles per hour) on the Saffir-Simpson Hurricane Wind Scale. Colorado State University also called for an above-average storm season, predicting twenty named storms, ten hurricanes, and five major hurricanes. These forecasts are above the thirty-year average (1991 to 2020) of fifteen named storms, seven hurricanes, and three major hurricanes. Last year, according to Business Insurance magazine, named Atlantic storms cost about $80 billion in insured damages. As hurricanes become an increasing threat, early preparation has never been a higher priority.
Most financial and risk managers are comfortable understanding and purchasing their property and liability insurance needs and limits to protect their companies from a loss due to an insured peril. However, their comfort level drops dramatically when it comes to business interruption coverage and limits. Due to this discomfort and unsurety surrounding business interruption coverage, extensions of coverage, and respective limits, many middle-market organizations find themselves underinsured and short of cash when faced with a major loss.
When you meet with your broker to review your insurance policy, you should focus on your reported or insured values for your business interruption coverage and the numerous extensions of coverages offered based on your organization’s specific operations and needs. Calculating the appropriate business interruption values will help you select the proper coverage and respective limits and enable you to better manage—and more importantly, minimize—your financial risk.
Unexpected occurrences can happen to any business, and when a company is directly or indirectly affected by an outside event, it may not be fully prepared. Whether the outside event is a hurricane, flood, earthquake, or fire, the disaster can be catastrophic. Even when there is advanced warning for an event, such as a hurricane, prudent companies prepare for the unexpected while also considering the safety of employees and customers. A catastrophic event can shut down a business for an extended period, dramatically affecting a company’s ability to generate future profits and pay employee wages.