How Much Would Your Business Have Suffered if Joaquin Had Hit? / Insurance / Last Modified: February 22, 2017

Despite the recent near miss, the East Coast remains vulnerable to storm surge. Is your business in one of the 8 most at-risk cities?

The entire East Coast let out a huge sigh of relief when Hurricane Joaquin, the strongest storm of the 2015 hurricane season thus far, headed out to sea.

The Category 4 storm would have wreaked havoc on an already soggy Eastern seaboard.

recent report from Karen Clark & Company (KCC), a leader in the catastrophe risk management industry, gives some insight into just how much a storm like Joaquin would cost various coastal cities.

Here are the top eight U.S. cities most vulnerable to storm surge flooding as ranked by losses to residential, commercial and industrial properties according to KCC’s modeling: 

  1. Tampa, Florida -- Estimated loss: $175 billion
  2. New Orleans, Louisiana -- estimated loss: $130 billion
  3. New York City, New York -- estimated loss: $100 billion
  4. Miami, Florida -- estimated loss: $80 billion
  5. Fort Myers, Florida -- estimated loss: $70 billion
  6. Galveston-Houston, Texas -- estimated loss: $55 billion
  7. Sarasota, Florida -- estimated loss: $50 billion
  8. Charleston, South Carolina -- estimated loss: $45 billion

KCC’s study is unique because it takes the likelihood of a hurricane hitting out of the equation and focuses purely on potential property damage, including building, contents, and time element losses. This is important because the relative rarity of catastrophic storm events, so-called 100-year events, can give people a false sense of security.

For example, how many New Yorkers seriously considered the impact a hurricane would have on their life before Superstorm Sandy hit? Looking at a study like the one done by KCC would have alerted New Yorkers to the real risk of something many of them considered a “southern state thing.”

Related Article: Does Your Small Business Need Commercial Liability Coverage?

The Myth of 100 Year Events

Just because a serious storm is a rare “100-year event” does not mean that your business only needs to think about these sorts of storms once every 100 years. Hurricane Joaquin is a good example of this. When the storm was tracking toward New York City, many who had lived through Superstorm Sandy, and heard it referred to as a 100-year event, were shocked that another large storm could be headed their way since it has clearly not been 100 years since Sandy hit.

The truth is these storms can occur at any time, even in back to back years. The 100-year moniker comes from the intersection of statistics and risk management practice, there is no actual guarantee that a bad storm will only come once every 100 years.

Preparing Your Business for the “Storm of the Century”

Business owners all along the Eastern and Gulf coasts, particularly in high-risk areas, should make sure they are prepared for the worst. The Federal Emergency Management Agency (FEMA) has a whole program dedicated to helping businesses of all sizes prepare for disastrous events. The Voluntary Private Sector Preparedness Accreditation and Certification Program, also known as the PS-Prep Program, provides businesses with a template they can use to craft a custom disaster preparedness plan.

The FEMA website has guides for developing:

  • Emergency evacuation plans
  • Business continuity plans
  • Cost worksheets
  • Risk assessments

The Best Defense Is a Good Offense Insurance

One thing the PS-Prep program doesn’t really focus on is insurance. Knowing what coverage your business has and being prepared to fight for all the coverage you deserve are critical aspects of disaster planning. While early preparation can be tedious, it pays dividends, particularly when it comes to hurricane damage.

According to the National Oceanic and Atmospheric Administration, the most deadly and damaging aspect of tropical storms is their surge. Storm surge is basically a wall of water that is pushed on shore by the storm’s winds. Nearly half of all tropical storm-related deaths in the United States since 1963 have been caused by storm surges, and the majority of property damage is also surge-related.

Although surge damage is the most common type of damage caused by a hurricane, because of its unique nature, whether it is covered by insurance is hotly debated. As the KCC study explains, the magnitude of a surge is related to many factors, including the size of the storm, the angle at which the storm hits the coast, the topography of the ocean floor along the coast, and the intensity of the storm’s winds.

The wind aspect is particularly important in the insurance coverage context since flood damage is generally not covered by homeowners or property insurance (that’s why flood insurance is sold as a separate product), but wind damage is covered. Surge damage is tricky because it is water damage like that caused by a flood, but it is very wind-dependent. Knowing exactly what your business is protected against is critical to being adequately prepared.

Related Article: 9 Ways to Save Money on Business Insurance

So How Much Would Your Business Lose in a Bad Storm?

Major storms are impossible to predict more than a few days or hours in the future, but that does not mean that preparing for the impact a catastrophic storm would have on your business is futile. Knowing your risk for damage allows you to prepare better, and better preparation minimizes damage.

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