Business Interruption: After the Storm, How to Deal With the Aftermath

In recent weeks, a series of natural catastrophe events caused devastation in cities across various parts of the world. These storms brought widespread damage, including loss of lives, destruction of property and other assets, and also business interruption.

Shortly after Typhoon Hato travelled across southern China, Hong Kong, and Macau causing severe damage and killing at least 12 people, Tropical Storm Pakhar followed and brought further damage to the embattled area. Both Hong Kong and Macau issued the highest typhoon warning level – for only the third time in the past 20 years in Hong Kong. According to Macau’s city government, Hato was the strongest typhoon to hit the city in 53 years.

Involve your broker and/or insurer as soon as possible to protect your interests under your insurance policy and to benefit from their expertise in handling post-storm situations

Tropical Storm Harvey has been lashing Texas for several days since the time it made landfall as a hurricane. At the time of writing, the storm has already set a record for rainfall in the continental US, with meteorologists predicting it could surpass the all-time rain record by the time it is over.

More than a dozen people have been killed, and many areas are flooded. In Houston, the mayor has even imposed a curfew. Business operations in the area have been severely impacted, with widespread effects observed, including in the oil as well as currency markets.

Given the strengths of these weather catastrophes, substantial damage to businesses with operations in the affected area is inevitable. It is crucial to take rapid action to safeguard your interests and minimize disruption to your wider business.

Here are some tips if your properties and operations are damaged by these storms, or by similar events in the future.

Assign an internal risk manager

This person may be from the risk/insurance department, human resources department, finance department, or someone else with reasonable management capacity.

This person should oversee the internal preparation of the claim and be the contact point with your broker, insurers, and any other experts involved in the claim. This person should then lead the internal data gathering process and liaise with your broker or the insurer’s claim representatives.  

Notify your broker and/or insurer

Involve your broker and/or insurer as soon as possible to protect your interests under your insurance policy and to benefit from their expertise in handling post-storm situations.

Your broker should be able to guide you through the claim process and minimize any prejudice to your claim.

Damage control

Before allowing full access to your property, work with trained specialists to mitigate risk of further damage to the asset, or injuries to people. For example:

  • Remove standing water and ensure structures are not at risk of collapse
  • If there is a power outage, disconnect all equipment that could cause injury or damage from a sudden power restoration
  • Remove any dangerous materials, debris, wildlife, or chemicals brought in by the storm/water
  • Stay in regular contact with your employees to check on their safety after the storm and provide humanitarian assistance as needed

Preserve the evidence

Preserve the damaged property while waiting for the insurer’s investigator/loss adjuster to verify the damage.  It is important not to dispose of or demolish the damaged property unless approval has been obtained from the insurer’s investigator.

Take photographs or videos of standing water, and record progress as it recedes in order to measure resulting water damage

Relocate the damaged property to a safe location should there be exposure to further damage if left unattended. If possible, take photographs of the post-storm conditions of the affected properties immediately when access is available.

Do also take photographs or videos of standing water, and record progress as it recedes in order to measure resulting water damage.

Document your losses

You will need supporting evidence to establish the validity and extent of your losses. You should be prepared to provide:

  • Records of financial losses. It is recommended to create a new general ledger account to document any extra expenses incurred. Similarly, use a unique accounting code to capture all labor costs related to your recovery
  • Records on orders and agreements with customers and suppliers
  • Records of service interruption details. Wherever possible, note the time, location, and reason for any interruption, along with the specific affected equipment used by utility providers – including substations, transmission lines, and distribution lines – and distance from your property
  • The most recent physical inventory
  • Payroll records for employees used in cleanup and recovery, including tasks performed, specific hours worked, and pay and overtime rates
  • Purchase orders or estimates of all contracts for repair or replacement of damaged assets
  • Profit and loss statements for the two years prior to the event for all affected locations
  • Fixed asset register and depreciation records
  • Budgets and forecasts prepared before the loss to depict anticipated loss results

The above list is not exhaustive and the insurer may require more information and documentation to assist them in their assessment of the claim. Please make sure to keep your broker and the insurers’ representative informed during the course of recovery. Your insurers may require prior approval to be obtained from them for certain repairs and replacements.

Managing the effects of a storm or other natural catastrophe can be a challenge, but together with your broker and insurer, you can better manage your loss and accelerate your recovery. Always remember that it is of utmost importance to involve your insurance advisers (i.e. your broker) in your claim and recovery process.

About the Author

Wendy Lim is Claims Analyst at Marsh Singapore, which gives clients access to the Marsh Global Claims Practice, Marsh Claims Advocacy and, for claims preparation services, Marsh FACS (Forensic Accounting & Claims Services). 

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