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Katrina’s risk management lessons … 10 years later

By Higginbotham on August 25 , 2015

Insurance lessons from Hurricane Katrina

When Hurricane Katrina made landfall in August 2005, no one could have predicted it would be such a game changer. The storm devastated the Gulf Coast, taking 1,800 lives, causing tens of billions of dollars in property damage, destroying hundreds of thousands of homes and thousands of businesses, impacting oil production, and decimating the tourist industry. In New Orleans and other areas, the scars are still visible, ten years later, and many areas still struggle to rebuild.

For the insurance industry, Katrina was a wake-up call. According to the Insurance Information Institute, it was the costliest natural disaster in U.S. history, causing more than $41 billion in insured property damage. If you count the claims filed under the National Flood Insurance Program, total insured losses were around $60 billion. In response, the industry has made significant changes in the way it approaches catastrophe modeling, property claims, and crisis management. And insurance carriers have forged closer relationships between policyholders and claims teams, and increased their focus on business interruption risks.

A sobering lesson for business owners

For businesses, Katrina served up some hard lessons about the vulnerability of commercial buildings located near water, and about their insurance coverage. For example, even though businesses generally had windstorm coverage, many got a rude awakening when they found out they weren’t covered for storm surges, which caused most of the damage in New Orleans and the surrounding areas. The massive weather event made it clear that businesses need to do a better job of coordinating their risk management, emergency preparedness, and emergency response initiatives.

One of Katrina’s biggest lessons? Business continuity and disaster recovery planning are paramount.

According to a Federal Emergency Management Agency (FEMA) report, two-thirds of businesses updated their disaster recovery plans after Katrina. And before Katrina, most organizations didn’t have anyone in charge of business continuity, but many now do.

But memories can be short, and many companies still aren’t doing enough to protect themselves financially with business interruption and disaster recovery plans.

Will your business survive the next natural disaster?

With devastating storms on the rise, here are six tips for making sure your business is prepared to survive the next big disaster:

  1. Know your vulnerabilities. How will your business be impacted by a windstorm, flood, earthquake, or tidal surge? How about your customers and suppliers? Take stock of every exposure. Leave nothing to chance.
  2. Protect your employees. Your workers are your number one asset, so have a plan to keep them safe if disaster strikes, including an evacuation plan and basic necessities such as water, food, and shelter.
  3. Have a plan to keep the business open. You need a detailed business continuity plan that addresses all of your critical business functions and processes. Organize a business continuity team and conduct regular training with your staff on managing a business disruption.
  4. Have a plan to maintain communication. During a storm like Katrina, thousands can be left without power, cell phone service, and essential communications. Be prepared with alternatives such as satellite phones, along with an uninterruptable power supply and/or generators.
  5. Protect your data. Have offsite and redundant backups so you don’t lose all of your data if disaster strikes.
  6. Carry adequate insurance. Without the right insurance, a disaster can wipe you out for good. Make sure you have the financial protection to cover all of your exposures and get back on your feet quickly.

Take a lesson from Katrina – don’t be caught unprepared. To help you protect your business from the next big disaster, contact the risk management experts at Higginbotham Insurance.

Tags: Risk Management

  
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