This week is Hurricane Preparedness Week, which seems a pretty good time to examine the impending hurricane season, and explore some advice for agents and brokers selling hurricane-related products.
Indeed this year also marks the fifth anniversary of Superstorm Sandy, which cost $65 billion, making it the second-costliest storm ever in the US behind Hurricane Katrina.
When it comes to hurricane season, Andrew Higgins, technical manager of the Americas for Allianz
Risk Consulting, gives one ultimate piece of advice: ignore the forecasts and simply be prepared.
“This year, pretty much all of [the forecasts] are saying that it should be a pretty normal hurricane season, or normal to slightly-below-normal in terms of the frequency and intensity of storms that are supposed to occur,” Higgins says.
“Now, to give you my opinion on the whole forecasting thing … to be blunt, it’s sort of a waste of time. They simply don’t have the modelling ability to be able to predict, with any accuracy, what is going to happen. They miss it as much as they hit it.”
The forecasts attempt to predict the number of hurricanes that may occur – but they don’t say how many are expected to actually hit landfall, Higgins says, which is the crucial aspect.
“All it takes is one storm like Superstorm Sandy to make landfall and, even in a hurricane season that may have been light, then you’ve got incredible losses,” he says. “What I always tell people is: no matter what the forecast is, you need to be prepared.”
The last major hurricane to make landfall in the US was Katrina, which devastated New Orleans in 2005, killing more than 1,800 people and creating $125 billion in damages, mainly in Louisiana and Mississippi.
“When you think of a hurricane, most people think of wind damage, but Sandy was an example of a storm where wind damage was very, very light, but the flooding is what created most of losses,” he explains. “We have to remember that [Like Katrina too] storm surge and flooding can, and typically does, cause more damage than the actual wind itself.”
Higgins says that rising global water levels will continue to make hurricane season, and flooding, worse. “With higher sea levels, we’re going to see higher damages,” he notes.
But he has four tips brokers should impart on their clients – beyond just ignoring the forecasts.
“The first one is to make sure that you have an emergency preparedness plan that is up to date, that encompasses all the nat cat losses and fire losses that could occur, and make sure that plan includes a wind storm,” he suggests.
“Two: I would recommend that everyone review their business continuity plan, or business contingency plan, to make sure that plan is up to date, that people know how to implement it.
“The third thing I would do, sit down with the clients and go through the policy to really understand what it covers and what it doesn’t. Flooding isn’t always covered, sometimes it is, sometimes it isn’t.
“And the fourth issue is: for those facilities that are in harm’s way along the coast … I would really, really encourage those clients to consider making improvements to the building and the site to enable that facility to withstand both the high winds and the flooding.”
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