Business continuity plans vital in light of weather events

The number of storm and flood insurance claims in New Zealand has increased by 56% over the past three years and this has been accompanied by a significant spike in the cost of claims.

NZbrokers chief executive Jo Mason said New Zealand small and medium-sized enterprises (SMEs) needed to do more to prepare for adverse weather events, as the new industry figures showed the cost of insurance claims had increased by 70% in the three years.

Much of the country is bracing for a rough 48 hours as a storm  with the intensity of an ex-tropical cyclone sweeps across the North Island and top of the South Island.

Civil Defence is on high alert as the top of the North Island prepares for a pummelling from ferocious winds, torrential rain and enormous waves.

Ms Mason said the  Global Facility for Disaster Reduction and Recovery, partly funded by the World Bank, ranked New Zealand at a "high hazard" level for most flooding and cyclone events.

Reinsurers used area-specific data to calculate the risk profile of parts of New Zealand, which determined the cost of insurance premiums.

"While we were already rated as a high risk for seismic activity, now storm and flood losses in our market are on their radar, as well."

Data from the World Meteorological Organisation was projecting that weather disasters would continue unabated until the 2060s, she said.

Of particular concern for New Zealand was ocean temperatures being among the warmest on record as global sea levels continued to rise.

Despite evidence that emissions were now levelling out, the concentration of CO2 would remain in the atmosphere and had increased at a record pace over the past year.

"Due to the inertia of the climate system, scientists expect to see the number of weather-related disasters continue for the next four decades."

While there was still debate about the impact of climate change on inclement weather patterns, businesses needed to ensure they were prepared for those types of weather events, Ms Mason said.

The data showing the rapidly rising costs of claims should be enough for companies to review not only their current level of insurance cover but also how they would maintain business continuity.

In the past 18 months, insurers had paid out more than $265million for 15 serious weather events in New Zealand, the largest being $91.4million for ex-cyclone Debbie, particularly in Edgecumbe.

The figures showed no particular region was affected more than others, she said.

"Weather events may cost less than a serious seismic event but the increasing frequency and geographic spread of events showed every business in New Zealand should be prepared."

New research showed insurance alone might not prevent a business from failing in the event of a disaster, Ms Mason said.

A recent study of the longer-term impact of the Christchurch earthquakes on local business found they were unable to recover when they ceased trading for months, even though there was no physical damage to their business.

Businesses that had planned to handle a disaster event would significantly improve their chances of a successful recovery, she said.

In the US, nearly a quarter of SMEs closed after a heavy storm but preparing a business continuity or resilience plan was not often given the priority it deserved.

The quieter summer period could be a good time for business owners to reflect on their business resilience plans, Ms Mason said.

There were online tools  to build a plan and an insurance broker could help co-ordinate the insurance programme to meet a business’ individual needs.

In the US, a rare winter storm hit the southeast this week, bringing Florida’s capital its first snow in three decades, while New England braced for a "bombogenesis" blizzard.

The governors of Florida, Georgia, Virginia and North Carolina declared states of emergency, warning residents to expect icy roads and unseasonable freezing temperatures. In the northeast, work crews loaded trucks with road salt in advance of the storm.

Much of the eastern United States is in the grips of a sustained cold spell that has frozen parts of Niagara Falls on the American and Canadian sides, played havoc with public works, causing pipes to freeze and water mains to burst, and impeded firefighting in places where temperatures barely broke minus 7degC.

Forecasters warned snow would fall at a rate of several centimetres an hour, and the storm would be intensified by the "bombogenesis" effect. The "bombogenesis" effect, also known as a "bomb cyclone", occurs when barometric pressure drops by 24 millibars in 24 hours, greatly strengthening the storm.

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