Management of “The catastrophic claim”

How will your business be affected?

What will happen if you are hit by a major flood, storm or some other severe natural event?

What if your clients or your most important suppliers are affected?

During the flood in Thailand, in 2011, large areas of industrial compounds were, more or less, inaccessible. What if your key suppliers are located in such an area? Are you prepared and how will your business be affected? In what seems to be an evermore deteriorating climate situation, where storms, floods, heavy rains and the like are increasingly frequent, it is well worth spending some time to consider how you may prepare yourself and your business for such a scenario.

You will, of course, have the most influence over your own facility; but, even here, you cannot fully avoid being hit by, let us say, a flood. If you are at risk of being affected by a flood, you can prepare for it in order to minimize the effects. 

Planning ahead

You may be able to prepare by obtaining physical flood protection for the most exposed and critical areas of your facility. Or, you could, as several of our clients have done, establish permanent physical protection. This may imply a significant investment; but, it may prove to be the best option, as the effects of severe damage could be critical.

Another approach may include improving preparedness, such as having stored sandbags and necessary machinery available etc. Even though the government will often assist with these undertakings in an actual situation, self-preparedness is, generally, far more beneficial.

Furthermore, planning ahead on how to best utilize your staff in an emergency situation always proves useful, as does ensuring that local management has both the mandate to initiate a prearranged plan and that it is actually prepared to do so.

Our experience is that it is worthwhile to consider pre-nominating a project “organization” for such situations, as the ordinary management organization setup may not necessarily be optimal for dealing with an emergent situation.

Where do you store your equipment?

From time to time, during our claim handling, we detect that critical equipment has been located in areas that are more prone to damage by natural hazards, the reason may simply be that the risks have not been properly considered. Together with our clients, our risk engineers will, of course, try to identify such high risk “hotspots” and try to find better alternatives.

Our advice is that you should always consider where you have located or stored critical machinery, equipment and stock and, rather importantly, where you have based your IT servers etc. If your main IT servers, for any number of perfectly good reasons (such as there being a fire hazard, theft or safety risk) are stored in the basement of your facility and if you are situated by a river, you might also consider what could happen if the basement floods and how you can prepare to avoid this.

Prepare for the worst

It is generally more costly and troublesome to modify and alter your production site, hence, planning ahead, when establishing new operations or expanding your site, is essential. This planning process, along with the ever-increasing risk of being exposed to natural hazards, indicates a need to include this element in such plans. To be prudent, you might consider doing more than that stated in the general governmental regulations, particularly, if the implications for your business are deemed to be severe.

Of course, there will always be different variables and risks to consider and the measures to deal with them may point in different directions; but, natural hazards, such as flooding, heavy rain, windstorms etc., should, nevertheless, be amongst the risks you should consider and prepare for.

As always, it is worthwhile to have a Business Contingency Plan in place, where you have evaluated and included the consequences of others, and not just yourself, being affected by a major natural catastrophic incident.

Handling damage caused by a natural hazard may be significantly different from that of a fire or any other incident that solely affects only you. First of all, everything around you may be affected.

The infrastructure may be severely damaged and accessibility to and from your site may be severely compromised  or obstructed for some time. This may affect your ability to bring in materials you need for your production or your ability to efficiently distribute your products.

As always it is worthwhile to have a Business Contingency Plan in place.

Unexpected affect on local government and resources

There may be considerable strain on the local government and resources, making it more difficult to deal with issues that would normally be less of a problem. Electricity, the water supply and other utilities may be scarce and constitute significant challenges. In situations like this, there are normally a great number of claims in a geographical area, and craftsmen and experts able to do repair and mitigation work may not necessarily be available.

Additionally, we have experienced that, following major incidents, such as earthquakes around the world, it might even be difficult to bring experts, equipment and resources into the area, from the outside.

You may very well be affected by the incident, whether or not your location is directly hit, as it is not unlikely that your clients or your suppliers will have been affected. We have experienced this repeatedly, for instance, in the aftermath of the earthquakes in South America, the floods in Asia or even following the severe windstorms in the Nordic countries.

When discussing insurance solutions, we, at If, will, of course, consider such situations carefully, together with our clients. Also we at If are very mindful during a natural disaster where family, friends and colleagues may have been personally affected by the event. This is nearly always one of the most important aspects of handling claims arising out of Natural Catastrophes.

How does If manage claims handling

How does If manage claims handling when our customers are hit by a major natural disaster? There is no doubt that dealing with a claim, even from a purely insurance point of view, may prove more challenging following a natural disaster than in a more normal claim situation.

For instance, international local insurance providers (our partners) may have a great number of affected clients and their resources will be busy dealing with a significant number of claims. Available loss adjusters and insurance experts may be scarce or they may, as we have already mentioned, be experiencing problems due to infrastructure challenges.

However, we have proven that we are able to help and assist our clients in situations where they experience a claim, under such circumstances.

During the flood in Thailand, in 2011, some of our clients where located in an area that proved hard to access. Our local loss adjuster contact, who is part of a major international network, made a significant effort and managed to visit sites others had deemed, more or less, inaccessible.

This provided us with important information and gave us the opportunity to further assist our clients. We have an extensive and very good worldwide network of local insurance providers who are normally the major players in the different countries; hence, the local insurance provider will have significant resources at their disposal, locally. In any claims situation, and especially following severe incidents, we cooperate closely with the local providers.

In a major claim, we will normally aim to be physically present, as soon as practically possible, with claim experts from If brought in from the Nordic countries. Solving the claim, in close co-operation with our client, locally and liaising with the client’s Nordic headquarters, is essential to us.

Mapping the clients

Normally, we will have already made a pre-defined Claim Program. In this programme, we will have pre-nominated loss adjusters and a pre-defined claims programme head within If, to safeguard the knowledge regarding the client’s needs, prior to any claim. This Claim Program should also identify our client’s key persons and their roles.

When an incident has occurred or threatens to occur, we map all of our clients, in the affected area, by the geographical site coordinates stored in If’s systems. By doing this, we aim to pro-actively contact clients that might be affected.

Moreover, this may enable us to initiate early co-operation, which is always a good start in a claim settlement process, and allow us to be able to assist when needed. Our aim is to offer advice to help prepare our clients for the special conditions a natural hazard situation creates, and of course, to offer first class claim services if
the claim occurs.

Article by

Oddmund Bleie

Leader Major Property Claims, If

Article published in Risk Consulting Magazine 1/2017