Climate change effects businesses in many ways; from physical damage due to strong winds, flood or fire to business interruption and employee liability costs. In light of the recent California wildfires, as well as the large hurricanes seen globally in 2018, climate-related insurance claims have gone up not only for the individual policyholders, but also from businesses too. Insured losses only from the Camp and Woolsey wildfires in California are expected to be between US$9B to US$13B !
In today's feature, the team at Pacific Prime has prepared a short guide on the effects of climate change that your business should prepare for. This will include a risk assessment and recommended insurance solutions for businesses to consider in order to be protected from unexpected climate changes effects.
Extreme weather and your business
Earth is experiencing a global warming phenomenon, where an increase in temperature caused by excessive greenhouse gasses is causing the planet's climate to change. Examples of climate change include extreme weather events, sea level rise, warming of the oceans, and other events . For the purpose of this article, we will refer to the climate changes effects in terms of extreme weather events, such as wildfires and hurricanes.
Is your business at risk of climate change effects?
How your business will be affected by climate change effects depends on many factors, such as:
- Your location. Are you located in areas where wildfires, flooding, or hurricanes have historically occurred? Can your business operation go on if your employees can't reach your premises?
- Your business type. Are you a production company, or do you offer services?
- Structural integrity. Are your premises build in a way to be able to withstand extreme weather conditions?
- Financial emergency preparedness. How long and diverse is your supply chain? How long can your business run without constant supplies?
By answering these basic questions, you will be able to identify whether your business is at high or moderate risk as it relates to climate change effects. With hurricanes getting stronger and occurring more often, and wildfires happening in the arctic circle , understanding weather and climate risks is crucial for any type of businesses: from a financial institution to a large farming company.
Climate change effects that your business should prepare for
Climate change effects can affect your business in many ways. Some are noticeable, like a flash flood or a wildfire, but some might be hard to foresee. Depending on your type of business and your specific business needs, the risk associated with extreme weather and global warming can be drastic. Let's look at some immediate and secondary business risks associated with climate change.
Property Damage
This type of loss is probably what comes first to your mind when you think of extreme weather risks. Insuring your property correctly can save your company a lot of money. Make sure that the property insurance for your business covers all of the assets on the premises, including the ones both inside and outside of the building(s), as, in some policies, assets must be named in great detail for a company to later make a claim for the repair or replacement of them.
Business Interruption
There are so many things that can cause a business interruption, and extreme weather only increases the chances of situations like:
- Shipments getting delayed
- A standstill in production
- Employees being unable to report to work
- Flight delays making it impossible to attend important business meetings
- Power outages
- And many more items that can cause a business interruption, and as a result, losses to the company
Employee Liability
Accidents can always happen, but this is especially true during a storm or fire. In most countries, employers are obliged to obtain employee liability insurance for their staff. This business insurance solution protects the company against lawsuits, and covers against compensation costs to an employee who sues due to illness or injury occurring in the workplace.
Public Liability
As unlikely as it sounds, extreme weather can cause damage to a third party's property or cause personal injury. Loose tiles, fallen trees, or chemical leakages all pose potential risks to third parties within the vicinity of your premises. Hence, obtaining public liability insurance adds an extra layer of protection to your business, as it covers legal costs and compensation claims made against your business by a third party.
Travel and Accident
Travel delays, lost baggage, canceled flights, and more can all result in lost income and frustration for your employees. Rising temperatures are causing more and more flight cancellations , and due to the recent wildfires in California, multiple flights had been delayed or canceled due to poor visibility caused by smoke. You and your employees can make a travel claim to cover the costs of delays or cancellations.
Your new climate change-focused business strategy
Other things to consider are all those improvements you can include in your business strategy to tackle climate change risks. For example, developing home office guidelines can minimize the losses associated with employee absenteeism due to a bad weather.
Adverse hot weather can increase your business' costs of cooling, while increased precipitation can damage crops significantly. Water shortages can hugely impact your business if you are in a business that relies on this resource. If so, looking into building your own emergency water tanks might be a good move.
Since the insurance industry is now trying to adapt to new climate change challenges, they might soon require special building reinforcements in flood or fire prone areas in order to insure a building at all. Assessing the state of your premises and addressing all identifiable risks is a good best practice to use to prepare for coming climate changes.
You might find it more cost-effective in the long term to change your business strategy into one that addresses climate change-related risks in order to reduce and manage those risks in advance.
Let experts advise you
Even though not every aspect of your business can be insured, it's important that you choose the right insurance to protect against business risk. We have briefly introduced the most vital business insurance solutions that companies should consider in the light of climate change and its effects on business operations. Now those who are in charge of their company's risk strategy might wonder how to secure such plans, so that such plans are aligned with risks and needs.
One way to optimize preparedness is to use the help of an insurance expert, such as an insurance brokerage like Pacific Prime. Pacific Prime is one of the leading global corporate insurance brokers, established in the year 2000, specializing in group benefits solutions and business insurance for a wide range of clients . Pacific Prime is known for its unique approach, which consists of a consulting, policy broking, and further plan administration on behalf of clients; all with the use of our in-house cutting-edge technological platforms.
Learn more about Pacific Prime's approach , and when you're ready to discuss your business insurance needs, contact us for a free advice, as well as a free plan comparison and quotation.
