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The 2023 Hurricane Season Outlook

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Atlantic hurricane season officially began recently, kicking off a disaster season that will run from June 1 through November 30. According to predictions from the National Oceanic and Atmospheric Administration (NOAA), the 2023 hurricane season will consist of 12 to 17 named storms, five to nine hurricanes and one to four major hurricanes. This falls into a fairly average range, but “average” is a bit unusual under the conditions currently emerging around the season.

“The upcoming Atlantic hurricane season is expected to be less active than recent years, due to competing factors—some that suppress storm development and some that fuel it—driving this year’s overall forecast for a near-normal season,” NOAA reported.

Hurricane researchers at Colorado State University notably marked the opening of the season with a revised forecast. After initially predicting slightly below-average hurricane activity in 2023, the researchers increased their estimates. Now, CSU is essentially predicting an average hurricane season, but one that is above-average for what is expected to be an El Niño year.

The last three hurricane seasons have been controlled by La Niña, which typically leads to more hurricane activity. While El Niño would typically help reduce such activity, current warmer water temperatures could ultimately cancel out most of that effect.

“While we anticipate a robust El Niño for the peak of the Atlantic hurricane season, the tropical and subtropical Atlantic have continued to anomalously warm to near-record levels,” CSU researchers explained. “El Niño increases vertical wind shear in the Caribbean and tropical Atlantic, but the anomalous warmth in the tropical and subtropical Atlantic may counteract some of the typical El Niño-driven increase in vertical wind shear.”

CSU anticipates 15 named storms, seven hurricanes and three major hurricanes, which is right in line with the NOAA forecasts. However, CSU forecasters noted that this year’s outlook includes particular uncertainty due to these conflicting factors.

As the hurricane season gets underway, the following tips can help businesses update and strengthen natural disaster recovery plans:

Review your business interruption insurance. Business interruption insurance coverage plays a critical role in helping ensure complete recovery from a storm. BI coverage relies on accurately reported business values, however, and recent changes in property values, replacement and repair costs, and inflation all impact those current values. To avoid the risk of being severely underinsured, make sure your coverage has up-to-date valuations so that claims payouts will be robust enough to rebuild your business. Check out the May/June issue of Risk Management for more information about the importance of accurate business interruption values and best practices for preparing a business interruption claim. 

Update your current disaster recovery plan. It is crucial to keep your natural disaster recovery plan updated. Organizations have gone through massive change over the past few years, including different work locations due to hybrid or remote work, staffing changes, and new technology that may aid in emergency response. Ensure your organization’s disaster recovery plan reflects your current personnel, equipment, insurance policies and contacts, and make sure to distribute it among all current members of any emergency response teams or other key stakeholders.

Do a dry run. The only real way to know if your disaster recovery plan works is to put it to use, and you do not want to wait until a natural disaster is at hand to find out if it works. Practice various scenarios and have key players act out their roles to gauge the effectiveness of the plan and make changes accordingly.

Take preventative measures. To weather disaster response well, disaster preparation is essential. Take steps now to ensure the organization will be able to operate as smoothly as possible during or in the immediate wake of a disaster. Back up data offsite or in the cloud, verify that multiple employees know how to handle certain tasks and ensure you have backup options to contact employees if primary communication channels are interrupted.

For more information on hurricane preparation and natural disaster recovery, check out these other pieces from Risk Management:

Recovery Tips in the Wake of Hurricane Ian and Hurricane Fiona

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Across the Caribbean, Florida, and up the Eastern seaboard to Atlantic Canada, communities are facing devastation from a recent—and ongoing—spate of mid-season hurricanes.

Ian follows right on the heels of catastrophic damage from Hurricane Fiona. In the Caribbean, 20% of residents in Puerto Rico are still without power after Hurricane Fiona, and the island took another pummeling from Hurricane Ian while it was a Category 4 storm. To the north, post-tropical storm Fiona inflicted catastrophic damage across parts of eastern Canada last week, causing devastating property damage and leaving hundreds of thousands of Canadians without power. While it is too early for complete estimates, ratings agency DBRS Morningstar projected the insured losses may fall in the range of $300 million to $700 million. According to Patrick Douville, DBRS’s vice president of insurance, “Fiona will likely be one of the largest catastrophic events in history for Atlantic Canada.”

Once it is safe to do so, risk managers will have considerable work to do to help their organizations and communities recover.

Dalton advised, “Additional steps businesses should take include engaging a professional claims preparation firm to help document the claim, preparing a daily timeline of impact and changes to operational activities, asking for a cash advance, and setting up a cost tracking code and/or general ledger account to capture incident-related expenses. If it’s a contingent loss, meaning operations are down because of physical damage to a customer or supplier, ask that customer or supplier send you documentation of their physical damage and ask them to communicate with you as much as possible.”

In the July/August cover story from Risk Management Magazine, “Hurricane Claims: Key Tips to Minimize Losses and Maximize Recovery,”attorneys Andrea DeField and Alice Weeks offered guidance on steps for risk and insurance professionals to take before, during and after hurricanes, including hurricane preparation and response checklists.

For organizations impacted by this season’s storms, the following post-storm tips can help risk professionals navigate disaster recovery and the claims management process:

Post-Storm Checklist

  1. Gather insurance policies and related insurance records. If your policy was destroyed or is lost, contact your insurance company or agent/broker to request a copy.
  2. Contact other business partners who may have copies of your insurance policies and records, such as attorneys and accountants.
  3. Give written notice to your broker and insurer immediately. Notice should provide the following basic information:
    1. Name and address of insured
    1. Location of loss
    1. Date and time of loss
    1. Contact name, phone and fax number
    1. Brief description of the loss
  4. Acquire copies of police or fire reports from your local police or fire department, if applicable. If individuals caused damage to the premises or stole anything in the wake of the disaster, obtain a separate police report about the damage or losses or request that additional information be added to the initial report.
  5. Secure vital records and ledgers. Ensure that your accounting department opens a separate general ledger for hurricane-related expenses.
  6. Collect photos or videos as proof of damage. Ensure these are taken before any mitigations are implemented so that they accurately capture the aftermath and losses.
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  7. To the extent possible, take steps to mitigate any further damage once the storm has passed.
  8. If you have not already, retain a forensic accountant to begin preparing your business income and extra expense loss calculations.
  9. Prepare a proof of loss. A proof of loss provides details identifying the property destroyed or damaged, and documents the amount of loss incurred. Generally, any information substantiating the claim can become part of your proof of claim, including photos, videos, receipts and records. Check with your insurer for the specific information required as some companies may ask for a detailed list of documents or require you to fill out a specific proof of loss form.
  10. Submit proof of loss, photos, and reports to your insurer. Be sure to check any time limitations on the submission of a proof of loss and request an extension, if needed.
  11. Assist with the insurance company’s investigation. Property policies typically allow the insurer to conduct a reasonable investigation of the claim and require the insured’s cooperation. This may be in a provision titled “Duties in the Event of Loss” that allows the insurer to interview the policyholder claimants in a process called an “examination under oath.” The policy may also require the insured to exhibit the property, take reasonable steps to protect it, and generally cooperate with the insurer’s investigation. The insurer’s requests for information must typically be considered reasonable, however. A policyholder’s failure to reasonably cooperate could be used by the insurer as a defense to coverage.

Hurricane Risk Management: Key Considerations Before and After Storms Strike

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On Sunday, August 29, Hurricane Ida made landfall in Louisiana as a Category 4 storm with winds of 150 miles per hour, making it one of the most powerful storms to ever hit the United States. Striking on the same date that Hurricane Katrina devastated the region 16 years ago, Ida caused significant wind damage, storm surge and flooding in Louisiana and Mississippi and has left 1 million homes and businesses without power, including the entire city of New Orleans. Ida has now weakened to a tropical storm and will continue to cut through the south before making its way across much of the East Coast, bringing significant risks of wind, rain and inland flooding throughout this week.

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The storm marks another overactive hurricane season officially underway in the United States, prompting business leaders and property owners to ensure they are adequately prepared from an insurance and risk management perspective.

Some key recommendations to consider before and after any hurricane include:

Preventative Measures

First, establish a plan that includes clearly defined roles and responsibilities for preventative measures to protect your building, employees or tenants in the event of a hurricane. This plan should include everything from the identified incident response team and the established internal and external communication protocols to the selected offsite workspace and disaster recovery plan.

It is also critical to have a predetermined contact list for key service vendors, suppliers and contractors—and to build relationships with those individuals in advance. When a storm of any magnitude hits, multiple businesses will likely be affected, so establishing a vendor rapport beforehand allows you to pre-negotiate rates and availability guarantees, helping to save time and money after a disaster.

From a property perspective, ensure that your buildings and structures are adequately protected to mitigate potential damage. Precautionary steps like boarding up buildings, covering windows and landscaping, and fastening anything that could blow away or fall may seem like small considerations, but can significantly reduce damage and losses.

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Additionally, back up important paperwork and IT services to avoid losing valuable assets. Severe weather often causes power outages and other service disruptions that may last longer than anticipated, and key files like property records and facility plans should be safely stored and easily accessible in the event of a hurricane.

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Not only is this important for overall business operations, but it is also easier to adjust claims when you can show that you recently backed up files.

Read the Fine Print

When it comes to your insurance policies, it is critical to verify that your coverage includes appropriate, up-to-date limits and deductibles.

This includes determining if you have adequate insurance based on your location and its respective risk for floods or windstorms. In addition, you should review your policy’s sublimits, which set coverage limits for certain scenarios, so you know what to expect if damage occurs. For example, windstorm, flood and named storms all have different limits based on the typical severity of the type of storm.

Do not wait until the hurricane is coming to evaluate or modify coverage, as this is like trying to insure a burning building, and insurance carriers will be bombarded with requests. Perform these evaluations and changes proactively so you can remain calm knowing the appropriate coverage is in place for any potential threat.

If a hurricane does hit close to home, business owners can typically tap into business interruption insurance and extra expense limits for any losses that occur due to suspended operations resulting from the storm. This also applies to property owners who may need to move tenants to a different location while the property is being fixed—a process that could take several months depending on the severity of the hurricane and the associated damage—and are therefore not incurring rent.

Now What?

If a hurricane impacts your business, implement your disaster recovery plan. Then, as soon as it is deemed safe to re-enter the property, document all damage in detail with written descriptions, as well as photos and/or videos. At this time, take a full inventory of damaged materials, as this will be important throughout the claims process, and save any pieces that could help with restoration down the line. Most claims require you to immediately notify the carrier of damage and provide the documented “proof of loss” within a specific time frame. Before doing so, reach out to your insurance broker who can help guide you through this process.

Another best practice is addressing any damage in a timely manner to avoid any issues that could worsen with time or additional weather events. Taking immediate action, such as covering an exposed roof, securing doors and windows, removing water, and drying out any affected areas, can lessen the potential impact of further deterioration and keep those in the vicinity safe from harm. For more dangerous and technical issues, like getting the electric system back up and running, consult a qualified professional.

While hurricanes can certainly be daunting, there are ways to prepare in advance to make sure you are not caught off guard or without a plan. Be sure to assess your risk and execute the appropriate steps to protect your business, property and employees. Most importantly, lean on your insurance broker and other qualified vendors with any questions or concerns.

Key Insurance Considerations in a Record Hurricane Season

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The active 2020 hurricane season has produced so many named storms that scientists ran out of traditional names and have moved to the Greek alphabet for the first time since 2005. Most recently, Hurricane Sally struck the Gulf Coast, making landfall in Alabama with winds above 100 miles per hour, causing widespread destruction, and leaving hundreds of thousands of residents and businesses without power. Ensuring that your business’ insurance program is ready to deal with such perils will prove critical to maximizing insurance recovery for business interruption and property damage claims. Below are critical steps policyholders can take now to ensure that insurance available if and when it is needed.

Locate a Copy of Your Policy

Having your policy on hand prior to a loss will help start your claim as soon as possible, as it may be more difficult to contact your insurer or broker following a storm, when thousands of claims are taking place simultaneously. Your policy will also provide important information regarding how to get in touch with your insurer following a loss.

In addition to windstorm and flood coverage, commercial policyholders should ensure that they have the following specific coverages in place before a storm hits:

  • Physical Loss or Damage to Insured Property: This is the basic coverage afforded under almost all commercial property policies. Policies generally cover the cost to repair, replace or rebuild property that suffers physical loss or damage. Covered premises are usually listed or scheduled in the policy and may include not only buildings, but also equipment and business personal property such as furniture, machinery, and stock. Although typically a lesser concern, many policies do not include coverage or limit coverage for outdoor landscaping and paved surfaces like parking lots.
  • Debris Removal: This covers costs incurred when removing debris from covered property damaged by an insured peril such as a windstorm. The maximum policy benefit for this coverage is usually expressed as a percentage of the total loss.
  • Expenses Incurred to Mitigate Loss or Damage: Property policies often cover expenses incurred to prevent or minimize loss or, where some loss has already occurred, to mitigate additional loss. In fact, many policies say the policyholder must take steps to safeguard the property and prevent further damage. Failure to do so could jeopardize coverage.
  • Extra Expense Coverage: Extra expense coverage is intended to indemnify the policyholder for expenses that are above and beyond the business’s normal operating expense that are incurred to continue operating the business after damage has occurred. Examples may include the cost of a generator when electricity is lost, increased costs to secure new materials or replacement inventory or costs to operate at a temporary location.
  • Business Interruption Coverage: Business interruption coverage is designed to cover lost business income resulting from the total or partial suspension of operations due to covered property damage. Typically, this coverage does not apply until after a designated “waiting period”—usually defined in hours—which operates as a sort of “deductible.”
  • Orders of Civil Authority: Coverage may also be available when business income is lost as a result of government directives, issued because of property damage to other property, which prevent or restrict access to the insured property. These can include evacuation orders or curfews. These losses may be recoverable even if the company’s own property has not been damaged.
  • Ingress/Egress Coverage: Similarly, many policies cover losses when entry to or exit from a covered property is prevented or hindered by damage of the type insured under the policy, such as downed trees covering a road or a broken bridge. Importantly, the damage need not be to insured property so long as the damage prevents ingress to or egress from an insured location.
  • Service and Utility Interruptions: Some policies may also provide coverage for business interruption losses and extra expense caused by power, water, and telecom outages if those outages are the result of an insured event. This coverage is typically sublimited.
  • Contingent Business Interruption Coverage (CBI): Contingent business interruption insurance and contingent extra expense coverages provide reimbursement to the policyholder for lost income and extra expense resulting from property damage to a separate, non-insured property, often in the policyholder’s supply chain. The third party could be a supplier of critical materials or components; a transporter of goods, materials or resources; or a wholesaler, retailer, or customer who purchases or consumes the insured’s goods on a regular basis. Some policies may offer this coverage for “leader properties” or “attraction properties” within a specific mile radius of the insured property.
  • Extended Period of Indemnity: Policies may also provide for an extended period of indemnity, thus extending the time of covered business interruption losses from the time the property is repaired for several additional months. This coverage is designed to ensure coverage for any “ramp up” period the policyholder experiences to ensure coverage until business returns to normal.
  • Spoilage Coverage: Commercial property policies for food-service and hospitality industry insureds may also contain endorsements providing coverage for loss of perishable stock at the premises of the policyholder.
Have an Insurance Response Team in Place Before the Storm

Commercial policyholders should know who they are going to contact for emergency repairs and services. Having an emergency action plan in place, with cell phone contact numbers, will minimize downtime and maximize recovery efforts after the storm. Document or photograph your pre-loss inventory and other insured assets to provide to your insurer when adjusting your claim. They may not be able to reach your property immediately following the storm.

Following the storm, your team should set up a general ledger to capture all storm-related costs, expenses, and time, including costs incurred to mitigate storm losses. Designate a point person to liaise with the insurer’s adjuster and to submit storm-related invoices, quotes and contracts.  Document everything, including physical damage, evacuation orders, curfews, power outages, supply chain disruptions, and extra costs.

Present Your Claim As Soon As Practicable

Insurance companies require prompt notice of a loss. Once the claim is submitted, check your policy regarding the submission of a proof of loss, as is often required. These documents have deadlines, some of which are triggered without any request from the insurer. Request an extension if you need one to ensure timely submission. Use photographs, videos, or other documentation to substantiate your claim, and keep a log of all communications with your insurer and adjuster, including phone calls. An accurate timeline of communications will assist in any potential litigation regarding your claim.

In the event of a denial, delay, or recovery smaller than required to repair your business, experienced coverage counsel can help you analyze your policies, enforce your rights and hold your insurer to their contractual and statutory obligations.