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Insurance, risk management options fall short on catastrophe planning, brokers say

Concerns over natural catastrophe risk have risen for middle market businesses, but the insurance and risk management solutions to address them appear to be lacking, according to a global survey of brokers.

Assurex Global asked over 80 independent insurance brokers around the world about their clients’ concerns about such potential disasters as flooding, windstorms, earthquakes, and tsunamis. Over half of the respondents felt their clients’ catastrophe exposure rose over the last five years. Respondents in Latin America and the Caribbean, and brokers in the Asia/Pacific region had the most concern, at 78 percent and 67 percent, respectively.

Respondents reported that mid-sized firms fall short when seeking adequate insurance, risk management, civil infrastructure support, and business continuity planning, with one-fourth of brokers estimating that less than 20 percent of their clients have the right insurance coverage and preparation for disasters. Brokers reported inland flooding as the most significant natural catastrophe risk for the middle market customers, mentioned by 70 percent of respondents. Fifty percent cited hurricanes, cyclones, and windstorms, and 38 percent named earthquakes and tsunamis. In the US and Canada, hurricanes were rated as the top risk, compared to earthquakes and tsunamis in Latin America and the Caribbean, and flooding in the Asia/Pacific region as well as across Europe, the Middle East, and Africa.

Fortunately, 90 percent of brokers across the globe aided their clients in buying property coverage for catastrophic risks and 68 percent noted the development of business continuity plans. Fewer respondents (30 percent) said clients worked to shore up their supply chains and to improve employee response training (27 percent).

However, 60 percent of respondents cited the lack of “effective” business continuity plans, indicating that that presence of a plan does not mean the plan will work. In addition, 39 percent found insurance coverage for catastrophic risk to be cost-prohibitive.

“Although the types of natural catastrophe risks facing businesses vary somewhat in different areas of the world, there’s a common thread in terms of what must be in place for middle market businesses to manage them effectively,” said Jim Hackbarth, CEO of Assurex Global. “Certainly, having sufficient catastrophe insurance, effective business continuity management and a civil infrastructure that supports preparedness, response and recovery are all keys to managing these significant exposures. Further, senior leadership’s support of the company’s risk management measures is universally paramount to their implementation as well as to the company’s ultimate success and survival.”

Brokers reported frustrations for their clients – generally those outside North America — with lack of support from company leadership on disaster planning, as well as concerns about government and civil infrastructure not being equipped to respond to catastrophes.

Editor Erin Ayers can be reached at eayers@advisen.com.

  • 15 Aug, 2016
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