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It is no secret that catastrophic (CAT) events have been increasing in frequency and severity. One only has to look to Hurricane Ida, which made landfall this past August. AIR Worldwide estimated that insured losses from this Category 4 storm could range from $20 to $30 billion. While the severity of the storm is critical to note, so is its reach. Much of the damage caused by Ida occurred in locations far beyond the storm’s initial point of landfall reaching from Louisiana to the northeastern part of the US.
Hurricanes are not the only catastrophic events to reach a broader geography as the intensity and frequency of dangerous events continue to rise. Snowstorms, severe thunderstorms, hail storms, tornados, derechos and wildfires are becoming more commonplace and showing up in geographies unaccustomed to them.
As the world continues to change, business owners, including those in the lumber and building material industries, will need to understand their changing risks and take steps to protect their businesses.
We, at Pennsylvania Lumbermens Mutual Insurance Company (PLM), were fortunate to observe a presentation by Guy Carpenter on Severe Weather and Evolving Risks at a recent meeting presented by the National Association of Mutual Insurance Companies (NAMIC). Guy Carpenter’s experts said that severe weather – cold, hot, snow, rain, storms – is expected to “linger a bit longer than (it) used to.”
Specifically, they expect periods of rain to last longer leading to increased flooding in urban areas, around rivers and in watersheds. While it is unclear what we’ll see in terms of future hurricanes hitting the US, these experts acknowledged that hurricanes have been more active in recent years. They also expect thunderstorms to last longer and “flare repeatedly over periods of 7-14 days.” Additionally, Guy Carpenter’s experts noted a “statistically significant increasing trend” of large hail incidents (two inches in diameter or more) particularly in the Midwest, Great Lakes and Northeast.
Winter weather and snowstorms are also expected to last longer, leading to heavy snowpack and continued extremes experienced in regions unaccustomed to heavy snow. Infrastructure will continue to be tested as cold periods last longer and snowpack persists. According to the Insurance Information Institute, the first half of 2021 saw over $15 billion in insured losses in the U.S – largely due to the February 2021 winter storm that crippled the Texas power grid.
They reported that tornados have become more frequent and severe as well, as the median number of homes struck by EF1+ tornadoes grew from 4,515 in 2000 to 5,238 in 2020 and is projected to grow to 5,790 over the next 20 years.
Finally, the authors of the Guy Carpenter presentation commented on the rash of wildfires affecting the western part of our country. Brush and forest fires have decimated large areas and increasingly prolonged periods of dry weather are making fires burn longer and more often. They expect hot, dry conditions to continue fueling droughts and wildfires. They noted that six of the 20 most destructive wildfires, in terms of properties destroyed, took place in 2020.
What’s Being Done
Policymakers, corporate leaders and others are taking action to slow this trend. They recognize the problem and are working toward a solution. Guy Carpenter’s experts noted that policymakers are laying out new expectations for risk management related to assets, investments, insurance and legal liabilities.
As this work is done on a larger scale, good insurance companies are working with their policyholders to help them reduce their risk exposure to these catastrophic events. No business is immune from a severe weather event and lumber and building material dealers are no exception.
At PLM, we know the wood niche. We’ve been “with you” for more than 125 years and we’re here for our policyholders now as these new and evolving risks change the business landscape. We’ll work with you to develop a plan to mitigate your risk should a catastrophic weather event be headed your way.
What You Can Do
Critical to the recovery process for their communities, lumber and building material dealers will want to be prepared for catastrophic events, not only to protect their own businesses, but so they can avoid downtime and continue to serve the community around them after a disaster strikes.
The first step in keeping your business safe against catastrophic weather is to put together a storm/wildfire/severe weather preparation plan. This plan should consider every aspect of the business, including the facility, equipment, utilities, inventory, and personnel most importantly.
Having a plan is critical in preparing for unexpected weather, but business owners must also ensure they have the means to put that plan into action when the time comes. When a storm hits, operations can quickly be brought to a halt. Lumber and building material dealers should consider making CAT preparedness training part of their initial onboarding process.
To prepare your lumber and building material business for catastrophic weather, you’ll want to consider the following:
For severe storms:
- Upgrade windows and doors to be of storm-resistant quality
- Make sure your roof is in good shape and has undergone regular inspections
- Board up and sandbag windows and doors where/when appropriate
- Transfer equipment and inventory indoors where/when possible
- Follow the orders of local authorities
For extreme winter weather:
- Check for accumulation of snow and ice on roofs etc.
- Make sure heating systems are clear of combustible materials
- Ensure heating systems are properly maintained and keep a temperature of at least 40°F in buildings
- Inspect and perform regular maintenance on sprinkler systems
- Make sure property is properly manicured to keep brush cleared and allow for clearance
- Check for brush that can fuel fires
- Establish a noncombustible 5-foot zone around the property of defensible space
- Understand water availability and access
- Follow local evacuation orders
No area is immune to severe weather and nontraditional risk exposures are entering new geographies. One of the best ways to truly understand your business’s unique risk exposure is to talk to your insurance company or your insurance broker. Your broker and a PLM team representative can help you mitigate your businesses risks through appropriate coverages and adequate limits. For more information, ask your insurance broker about PLM, contact a representative at PLM directly at http://www.plmins.com/ or call 1-800-752-1895.