As many experts predicted, the 2024 hurricane season has already been active with a number of storms already wreaking havoc. In July, the National Oceanic and Atmospheric Administration (NOAA) added Hurricane Beryl to its 2024 list of billion-dollar disasters, and the storm’s formation in June made it the earliest Category 5 hurricane on record. AccuWeather estimated Beryl caused $28 billion to $32 billion in total damages, of which insurers may face $2.7 billion in damages in the United States alone, according to catastrophe modeling company Karen Clark & Co.
Last week, Hurricane Debby made landfall in Florida as a Category 1 storm and dropped over 10 inches of rain over areas from western and northern Florida to eastern Georgia and the Carolinas, according to The Weather Channel. Lake City, Florida, saw the most rainfall, with a total of almost 20 inches. As the storm made its way to the Northeastern region of the United States. In total, Debby led to the deaths of nine people and caused thousands of power outages, tornado watches and flooding, resulting in $28 billion in damages and economic losses in the United States, according to preliminary AccuWeather estimates. Karen Clark & Co. estimated that the privately insured loss from Hurricane Debby will be close to $1.4 billion in the United States.
As communities recover from Debby, some are already looking to the next storm. Hurricane Ernesto is currently a Category 1 hurricane heading toward Bermuda, making it the strongest hurricane to threaten the island in almost four years, according to The Weather Channel. Ernesto already left hundreds of thousands of people without power after hitting Puerto Rico, while 90% of customers in the Virgin Islands lost power at one point during the storm. Ernesto is the third hurricane of the 2024 season, which is almost four weeks ahead of the average pace. While Ernesto is not a mainland U.S. threat at this time, it is likely to cause large swells and rip currents up the East Coast throughout the weekend.
Even though Hurricanes Beryl, Debby and Ernesto occurred within normal hurricane season—June through November—most hurricane activity happens between mid-August and mid-October, also known as a “season within a season.” As this higher-risk period approaches, Michael Rouse, leader of Marsh’s U.S. property practice, advised, “Now is the time for risk managers to critically review their insurance policies and determine whether gaps exist. For example, does the property policy reflect all assets of the business such as all properties, equipment and other items that are essential for its operations? Addressing policy issues prior to the storm will help avoid these surprises.”
Before examining the finer details of their policies, organizations need to be sure they have adequate coverage in place to protect their facilities and personnel. The following insurance policies are must-haves for hurricane season:
- Property insurance: Commercial property insurance protects a company’s physical location and any equipment within the building or on the property. Verify that the current policy covers damage from wind-driven rain or wind and hail damage. If it does not, consider adding them to the policy.
- Business interruption insurance: BI policies cover the loss of income from having to temporarily close a business. In the wake of a hurricane, it can cover costs like lost revenue, rent and relocation.
- General liability insurance: While not specific to hurricanes, general liability insurance covers business risks ranging from customer injury and customer property damage, both of which can happen during a hurricane.
- Flood insurance: Due to the increase in severity of flooding and expanding flood zones, insurance companies are scaling back on flood coverage or raising premiums in many areas. As floods and severe storms often go together, if an organization can secure and afford flood insurance, experts recommend doing so.
- Contingent business interruption insurance: If third-party partners like vendors or utilities providers cannot operate, CBI policies can help cover lost revenue that results from others’ business interruptions.
- Specialty policies: Risk professionals should review any policies that an organization might have in place to cover specialty equipment. “These can include boiler and machinery coverage, transit policies, fine arts coverage and third-party coverages such as general liability and pollution policies,” Rouse said.
Once the appropriate policies are in place, Rouse recommended that risk professionals evaluate the following key elements:
- Clauses and exclusions: Take a critical approach and analyze the policies from the perspective of an adjuster, identifying any potential coverage gaps or surprises that may arise after a loss occurs.
- Valued assets: Assess the values at risk for property damage and time element exposures, and identify the risks that can impact property and business operations. It is crucial to verify that the existing coverage in place addresses these risks with sufficient limits and appropriate terms and conditions.
- Deductibles: Review policy terms to ensure thorough understanding of all deductibles and how they might affect the net recovery, especially as natural catastrophes have deductibles based on a percentage of values.