The severe snowstorms that struck northeastern US earlier this year are a stark reminder of the disruptive power of weather and its ability to disrupt everyday business. However, simple steps to prepare and plan for weather risks, which many companies still do not take, can significantly reduce damage and business interruption, according to Thomas Roche, FM Global’s northern Europe operations vice president.
Every year, seasonal wind, hail and snowstorms, as well as cloudbursts and floods, cause major disruption to infrastructure and property damage in Europe, the US and further afield. Such events-sometimes relatively small, localised storms-are increasingly causing problems for business.
According to preliminary figures from Swiss Re, insured losses from natural catastrophes and man-made disasters totalled $34bn in 2014, below recent annual averages. However, 2014 was characterised by a number of costly, yet not unusual, weather events. The biggest insured losses of the year were from summer storms in the US and Europe and winter snowstorms in the US and Japan, each costing insurers over $2.5bn.
There were a number of notable weather events in Europe last year, including floods in the South of France, Italy and the UK, and storms in northern Europe and Germany.
The biggest single insured catastrophe event in Europe-and the second costliest worldwide-was wind and hailstorm Ela in June, which swept across France, Belgium and Germany, causing insured damage of $2.7bn.
Such weather events are not particularly large or unusual, according to Mr Roche. “Storms and floods of this scale in Europe are predictable and have happened before, and therefore should not come as a surprise to businesses,” he said.
However, when they do occur they cause more financial loss than in past years. As risks have become more concentrated and interconnected many businesses have become more vulnerable to relatively small natural catastrophes, said Mr Roche. While not as high profile as hurricanes and earthquakes, these smaller weather events can still be very damaging, he added.
“Natural catastrophes have always been an issue for risk managers, but the impact of natural catastrophes has been growing as asset values have become more concentrated and as business focuses on efficiency,” said Mr Roche.
“Even smaller events are now having a greater impact as supply chains and businesses become leaner and more reliant on a small number of suppliers,” he added.
Companies should be open-minded about natural catastrophe risks and consider all possibilities, advised Mr Roche. “In my experience, too many people believe that it just won’t happen to them, only to find later that it does,” he said.
It is also now easier for companies to anticipate and plan for natural hazards, according to Mr Roche. National governments are more attuned to weather risk, provide a lot more data on natural hazards and are better at forecasting than in the past, said Mr Roche.
“If the data shows that you have property in a wind, quake or flood exposed zone, then it is best to act on it and make plans,” he said. “For example, if you have a facility located in a known flood zone, it is not a case of if it will flood, but when,” he added.
Preparation pays in the long run, according to Mr Roche. “You need to plan because the small things can save money later-for example, it takes time to build a flood defence and sandbags don’t come prefilled,” explained Mr Roche.
Planning for bad weather can also have a significant effect on the time it takes for a company to get back up and running after an event. “If you are the first in the market to be up and running, you gain a competitive advantage,” said Mr Roche.
Following storms in 2013, two neighbouring FM Global clients in the north east of England were flooded. One was back in business within months while the other is still not fully operational over one year on.
The mitigation of weather risks also does not have to be expensive, said Mr Roche.
“It’s often the simple things, like knowing how and when to cut the power in a flood, that are overlooked, but they all add up to make a company more resilient,” he said.
For example, 90% of the yearly wind losses experienced by FM Global clients are related to roof flashing, which results in inevitable damage to the roof covering and insulation. “Even wind gusts well below hurricane intensity can cause damage to inadequately secured flashing, however flashing can be properly secured for the cost of a few galvanised screws,” said Mr Roche.
The biggest impact from high winds often occurs when damage to the building’s exterior allows wind and rain to enter a facility. “Even a very small breach in the building envelope can destroy a large area of the interior. For this reason, keeping the building envelope sealed is one of the most effective ways to prevent windstorm damage at a facility,” advised Mr Roche.
In the case of flood risk, there are simple, practical steps that can be taken immediately, such as moving critical items out of basements and away from low-lying areas, explained Mr Roche.
The risk can also be reduced by making permanent physical changes to your facility, where practical, to keep floodwater out of key areas, or permanently elevating important items above predicted flood levels, he added.
Research has shown that, if unprepared, a flood could cost a company an average of £2.1m more in property damage. “It is therefore key for businesses to fully understand the exposure of their site to prevent flood loss,” explained Mr Roche.
This article first appeared in Commercial Risk Europe in January 2015.