PREPARE YOUR REAL ESTATE BUSINESS FOR THE 2023 HURRICANE SEASON

Frank DeLucia Senior Vice President Hub International Northeast

frank.delucia@ hubinternational.com

(212)338-2395

From flood waters, property damage and power loss to spoiled food, coping with the aftermath of a powerful storm could be very troublesome for real estate owners, managers and tenants. Therefore, during the Atlantic hurricane season, which officially began on June 1 and runs through November 30, owners and managers must take a multipronged approach to safety. This begins with crisis communications among management, employees and tenants, joined by business continuity planning and then backup efforts with the proper insurance coverage. But while the official hurricane season is June 1 to November 30, as defined by the NOAA, this period can begin earlier and run later so it’s important to begin preparing well in advance.

Generally speaking, the three main goals of any disaster management plan are to manage the business during the crisis, resume normal operations as quickly as possible and recover losses when it is over. By taking these goals into account when surveying the most critical areas of the business, companies can determine what steps they need to take to be fully prepared for hurricane season and beyond:

• Business income coverage. Review your limits, which include loss of income as a result of an event. Extra expense coverage often accompanies business income coverage for necessary costs, such as having to relocate your business operations temporarily. Coverage should be provided for 24 months.

• Flood coverage. Many business property policies exclude flood coverage. In April

2022, the Federal Emergency Management Administration (FEMA) rolled out a new risk methodology for flood insurance pricing called Risk Rating 2.0, resetting flood insurance rates for all policies for the first time in decades. In addition to property characteristics such as elevation, the location of machinery and equipment and the cost to rebuild, the new rating structure accounts for flood frequency, distance from a water source and the likelihood for multiple flood types.

• Examine deductibles. Do you have a percentage or flat deductible? A calendar year or occurrence deductible? Many policies will have lower deductibles for wind and hail events than for a named storm.

The current insurance market is volatile with rate increases seen in almost all lines of business. Carriers are underwriting more closely with greater demands on inspections and loss control recommendations and requirements.

Be proactive on safety including organized water mitigation plans and battening down all outside furniture, construction debris and materials on the roof or elevated areas. Be proactive on contractual risk transfer. Actively promote the placement of proper homeowners coverage on the part of all unit owners. Address property upgrades where possible. Implement outstanding recommendations from previous insurance carrier inspections. Regarding past losses, be prepared to explain corrective actions taken to prevent similar losses in the future.