Weather Considerations for Commercial Insurance

Is mitigation for weather perils just for the agriculture industry? Traditionally, when we think of weather significantly affecting businesses we think of the agriculture and energy industries. However, according to a report by the CME Group, economists estimate that as much of a third of the U.S. economy is financially sensitive to weather. That’s a $4 trillion chunk of our economy. It’s not just agriculture and energy either. One of the biggest sectors affected by weather is actually the retail sector. The impact is so widespread that wall street will often blame adverse weather for poor retail sales performance.

The fact is that weather affects many aspects of what we do each day, as well as when, how and where we do it. Unfortunately, according to the study conducted by the CME Group, the majority of respondents that need protection from weather risks said their companies are very or highly exposed and are not well prepared to cope with day-to-day economic risks of weather. 21% of businesses say that significantly adverse weather could have a severe impact on their financial performance.

For insurance agents and brokers with commercial products and insureds in the retail sector weather is an important consideration. What can you do to help your commercial clients understand their exposure to weather perils? A good starting point would be the same practices used for protecting non-commercial clients from adverse weather. However, there is more that you can do to meet your commercial insured’s unique requirements.

First and foremost, you will want to review your clients’ business disruption coverage to see how they would fair in specific adverse weather conditions. As always, we recommend an annual review with your recommendations and a few options for them to choose from. Outside of their specific policies there are business practices you will want to recommend to your commercial clients:

Businesses should build redundancy into critical processes and procedures. Whether they be administrative procedures, manufacturing processes or even revenue generating activities, vital operations should have a Plan B in case the primary functions are interrupted by adverse weather.

A simple, yet often overlooked preventative measure is to have a plan; specifically, a well thought out plan written down and officially disseminated to key personnel. A plan is no good if no one knows the plan or if key personnel have their own, ‘interpretation’ of what should be done.

To ensure that everyone is on the same page, and that a plan can be executed properly, plans should be practiced in scenario based training. This training should end with an assessment of what worked, what didn’t work and would needs to be approved. These practices apply to many business risks aside from adverse weather perils as well.

Finally, although weather is known for being unpredictable it is one of the few business risks that we can actually predict to a certain degree. This advantage is lost, however, if no one is monitoring the weather predictions. This doesn’t mean that you have to dedicate an employee to watching the weather channel. Knowing adverse weather seasons and being more vigilant during those periods can be very effective. Additionally, with today’s technologies there are many options for receiving and customizing weather alerts and updates.