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What Businesses Can Do to Prepare for Hurricane Season 2024 and Understanding Their Business Interruption Coverage

Robert Glasser

June 2024

Phil Klotzbach, a senior research scientist at Colorado State University (CSU), has laid out how bad the upcoming hurricane season may be.

“We’re very confident this year we’re going to see well above-normal hurricane activity,” Klotzbach indicated in a recent article.

Mr. Klotzbach predicts:

  • twenty-three tropical cyclones in the Atlantic basin for the 2024 hurricane season versus an annual average of fourteen.
  • eleven of those storms becoming hurricanes versus the average of seven.
  • five becoming major hurricanes (categories 3, 4, or 5) versus the average of three.
  • a 62 percent chance of a major hurricane making landfall in the continental US this season.

Further, National Oceanic and Atmospheric Administration (NOAA) forecasters said up to seven major hurricanes may form in an “above-normal” 2024 Atlantic hurricane season beginning June 1.

In a forecast exceeding that issued ahead of 2005’s record-breaking season that spawned hurricanes Katrina and Rita, forecasters expect between four and seven major hurricanes among a projected eight to thirteen hurricanes, which could result from seventeen to twenty-five named tropical storms, NOAA Administrator Rick Spinrad said.

Action Steps to Respond to Disasters

Senior management must understand the impact and ramifications of a catastrophic event affecting their business. Management must quickly effectuate alternative suppliers, manufacturing operations, warehousing, distribution, technology, and other operational components to get back on their feet with minimal disruption to their supply chain, manufacturing, or distribution of product or services.

Businesses can take several steps to respond to disasters:

  1. Crucially, businesses must protect the safety of their employees and customers. For example, a hotel should have evacuation plans and safe areas on the property for those who ride out the storm.
  2. Property damage can be mitigated by boarding up windows, shutting down damaged utilities, and/or moving inventory and stock to a safer location.
  3. Maintaining backup financial and operations files off site or in the cloud can facilitate a faster restart to operations and a smoother insurance process.
  4. A business must then put into action its pre-planned recovery team to assist with safety and property preservation. Notify your insurance broker, which will put the insurance company on notice and trigger the assignment of an adjuster to begin processing the claim.

Property Claims after a Disaster

Property damage from a disaster is often where a company will incur an immediate outflow of cash. The restoration process for an impacted facility requires immediate attention, whether it involves removing flooded property or drying out a building to avoid mold issues. The adjuster should perform a site visit quickly to assess damages and request an interim cash advance.

Protection against Business Interruption

Business interruption insurance is a primary form of insurance that protects against disruption of operations and resulting lost profits. Extensions of coverage also can be extremely helpful to a financial recovery.

  • Extended Period of Interruption (EPI) protects a company against losses that extend past the actual period of interruption.
  • Contingent Business Interruption (CBI) can enable the business to recoup lost profits as a result of the property damage at a supplier, customer, or feeder property even though the property may not have incurred damage or shut down operations.
  • If you have hourly skilled labor or are located in a tight labor market and cannot afford to lose trained workers, an Ordinary Payroll extension will allow you to pay them during the period the business is not operating.
  • Claim Preparation Fee coverage enables the company to hire a forensic accounting firm to help them capture, prepare, and present a claim to submit to the insurance company.

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Robert Glasser

Managing Director

New York, Denver