London, 28 May 2010 – The US National Oceanic and Atmospheric Administration (NOAA) issued its forecast for the 2010 Atlantic hurricane season yesterday. In 2010, NOAA expects an “active to extremely active” hurricane season, projecting a 70% probability of 14 to 23 named storms, eight to 14 hurricanes, and three to seven major hurricanes (category 3 or higher). NOAA’s forecast of an active season is consistent with other 2010 forecasts of hurricane activity.

According to the US Census Bureau, approximately half of the US population lives within 50 miles of a coastline. As the aggregation of population in coastal areas continues, and exposed property values and infrastructure increase, the total losses from hurricanes and other named storms will increase. At-risk industries include commercial real estate, hospitality, and public entities. (The energy industry is also vulnerable, but has managed prior catastrophes, such as Hurricane Ike, relatively well.)

Recent events - flooding in multiple US states, earthquakes in Latin America and Asia, a volcanic eruption in Iceland, and the Gulf of Mexico oil release - remind us that catastrophic events can have a compound effect on the property insurance market, impacting available capacity and pricing. It is prudent for risk managers to evaluate their exposures, measure potential losses, and take a number of pre- and post-loss measures to minimise a catastrophe’s impact on their business, their suppliers, and their customers.

Specifically, Marsh recommends the following:

Pre-Loss Measures

• Establish a catastrophic response team, which should include representatives from risk management, engineering, finance, human resources, legal, public relations and security, as well as a broker claims consultant and forensic accountant.
• Reconfirm or establish objectives of claim loss management plans with a broker claims representatives and, if one is assigned, an account adjuster. If no adjuster is assigned, clients should promptly come to agreement with their insurer(s) on plan objectives.
• Conduct catastrophe modeling, which can assist in evaluation of potential financial losses and setting or review of sublimit adequacy.
• Consider impact scenarios and develop decision models to understand and manage emerging threats related to hurricanes.
• Develop and regularly update business continuity and disaster recovery plans and procedures.
• Review supply chain management procedures to understand and minimize exposures related to suppliers, and consider alternative routes to market if traditional transportation methods could be disrupted.
• Complete up-to-date business interruption and property damage valuations by location.
• Ensure proper compliance with building codes.
• Develop properly worded and tested claims procedures.

Post-Loss Measures

• Arrange forensic accounting services to measure losses and prepare the financial metrics necessary to file a claim.
• Secure the assistance of a claims advocate from an agent or broker to prepare and manage the presentation of claims to underwriters.
• Secure preferred contractors to assist in necessary repairs following an event.

For more information on how Marsh helps clients prepare for and react to catastrophic events, please visit: http://global.marsh.com/disasterrecovery