Insuring Businesses Against Catastrophic Losses

Erratic weather patterns brought about by global climate change, along with natural disasters unrelated to climate issues, have become prevalent over the last decade. The tornadoes, wildfires, earthquakes, tsunamis and hurricanes that have made international headlines during this time period suggest that catastrophic losses are no longer a question of “if,” but are more appropriately viewed as a question of “when.” “Superstorm Sandy,” the combination hurricane-nor’easter anomaly that slammed the Northeast and parts of the Midwest, is only the most recent example of Mother Nature’s indiscriminate devastation.

When natural disaster strikes, an insurance policy can be the single most important document to the economic future of a business. Adequate protection against the potential (or likelihood) of catastrophic losses is not simply a matter of purchasing an insurance policy and stowing it away in a drawer or filing cabinet, only to pull it out and dust it off when a loss occurs. Rather, sound risk-management and loss mitigation protocol requires a thorough examination of the insurance program, an understanding of the scope and limitations of such coverage, and periodic assessments of whether the acquired insurance sufficiently meets the needs of the particular business (or whether there is a better coverage available in the market at a realistic price).