News Risk Management04 Jul 2018

Each dollar spent on hurricane protection prevents 100 times the losses-FM Global

04 Jul 2018

Every $1 a business spends on hurricane protection reduces loss exposure by an average of $105.

This finding is based on a new analysis by industrial property insurer FM Global, which analysed data on 1,800 client organisations over the past decade.

In Asia, hurricanes encompass what are commonly known as typhoons and tropical cyclones. These are prevalent in India, Bangladesh, north-west Australia, the Philippines and Indochina.

To arrive at the ratio, FM Global tallied an estimate for over 10,000 wind and flood related investments and their associated reduction in property loss and business disruption exposure for 1,800 clients around the world from 2008 to 2017. These estimates are calculated based on actual losses that have occurred at the thousands of properties it insures.

“Businesses often wonder if they are getting a good return when they invest in preventing hurricane-related wind and flood damage,” said FM Global senior vice president, engineering and research manager Brion Callori. “This analysis has yielded a pretty convincing answer. And the 1-to-105 ratio doesn’t even reflect the business repercussions of a major hurricane loss such as damage to reputation, market share and shareholder value.”

Actions to take

To help minimise the effects of costly wind damage, organisations should have backup power generators ready, rooftops inspected and secured, doors braced, windows covered, and vulnerable objects put away or strapped down, including rooftop equipment and solar panels, said the insurer, with the 2018 hurricane season in the Atlantic under way since June.

Businesses can prevent costly flood damage by elevating or sealing off valuable equipment, fastening storage tanks, inspecting fire protection equipment, and preparing to turn off utilities. Flood protection products that meet rigorous certification testing standards can reduce the need for sandbags.

It also advised any business exposed to flood risk to invest in developing and practicing a flood emergency response plan (FERP). Facilities with well-organised flood emergency response plans have nearly 70% less damage, and resume operations sooner than those with no plan or an inadequate one, according to FM Global’s loss history.

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