Constant news of hurricanes, fires and floods has led many to believe that natural disasters are increasing. The costs associated with these disasters are also increasing. The NASA Earth Observatory states, “Climate change may not be responsible for the recent skyrocketing cost of natural disasters, but it is very likely that it will impact future catastrophes.”
Climate change is a growing risk. Here’s why businesses need to prepare.
According to NOAA’s National Centers for Environmental Information, the U.S. experienced 14 separate billion-dollar disaster events in 2018. The total cost was $91.0 billion, the fourth highest cost on record. In 2017, natural disasters cost the U.S. $312.7 billion.
Both individuals and businesses alike suffer from the property damage caused by natural disasters. In many regions, it’s increasingly vital to maintain adequate insurance with coverage for wildfires, hurricanes and floods, but coverage rates are not as high as might be expected. According to Carrier Management, only about half of the homes and businesses impacted by Hurricane Harvey had flood insurance.
Even for those who want it, obtaining insurance may be increasingly difficult. After a series of destructive wildfires in California, finding coverage is getting more difficult, and more expensive.
A business that suffers major property damage will also experience business interruption. However, companies that escape property damage may not escape business interruption.
For example, if a hurricane forecast shows that your area is at risk, an evacuation order may go into effect. This will disrupt your ability to conduct business as normal, whether or not the hurricane actually causes significant damage or even makes landfall in your area.
A nearby wildfire can likewise cause business interruption, especially if smoke results in dangerously poor air quality or if nearby roads are closed.
Supply Chain Interruption
If you operate a business in an area that is prone to wildfires, hurricanes or floods, you are likely already aware of the impact natural disasters could have on your company. However, even if you are located in an area that appears relatively safe from these events, you may not be immune to the impact of climate change.
One way this impact could occur is through supply chain interruption. Your business depends on goods from other areas. If any of these areas are impacted by climate change, or if shipping is impacted, your business will feel the consequences.
Natural disasters aren’t the only possible risk, either. Rising temperatures could disrupt crops. There is also concern that climate change will contribute to political instability. These issues could impact your supply chain, and ultimately your business.
Have you reviewed your property and business interruption insurance lately? If not, now is a great time to contact your Heffernan Insurance Brokers agent.