Tornadoes and resulting property loss: how to prepare

March 27, 2024

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The wrath of a tornado — a narrow, violently rotating column of air usually associated with thunderstorms — can cause catastrophic damage spanning more than a mile wide and 50 miles long. Small objects can be turned into projectiles, trees can be uprooted, and home roof coverings can be uplifted, detached and fly off. An especially devastating tornado — which can carry wind speeds exceeding 300mph — can throw cars, rip walls from solidly constructed homes and even blow entire structures into the distance.

As tornado season slowly approaches for certain U.S. regions — early spring in the Mid-Atlantic, the Southeast and along the Gulf Coast, followed by May and early June in the southern Plains — property owners should not only prepare physically, but also understand tornado risks, its consequences and related insurance implications.

Tornadoes and property loss 

Tornadoes are more than a regional concern. Though certain regions are commonly associated with tornadoes — such as the “Tornado Alley” of the Great Plains or the Southeast’s “Dixie Alley” — they have been reported in all 50 states. Increasingly, they appear to be occurring in locations they hadn’t previously, while occurrences are also expanding into historically less-active winter months. In effect, populations that are inexperienced with these natural disasters, along with their property, will face unprecedented risk.

Tornadoes are among the most violent atmospheric storms that exist and can cause immense structural damage to properties. In 2022 alone, more than 1,300 tornadoes hit the U.S., which collectively caused $700 million of property and crop damage and as well as 25 deaths, according to the National Ocean and Atmospheric Administration (NOAA). Each individual tornado racked up, on average, $685,000 of damage.

These storms are unique in their sudden nature. Unlike a hurricane that can be tracked for days as it approaches, tornadoes simply form when conditions are favorable — and there is little-to-no time to prepare. Although a tornadic event will not typically generate the massive volume of claims as, say, a widespread hailstorm, destruction that accompanies affected areas is often spatially concentrated and catastrophic. It is not uncommon to see a swath of severely damaged homes, while property 100 yards away sits unaffected. 

Components involved in a loss

A claim is often handled by a dedicated loss adjuster who remains the insured’s point of contact from first notice and through the claims process until the claim is considered complete. After adjusters conduct damage assessments and submit a full-captioned report to the insurance carrier, they determine what resources are needed to restore the property to pre-loss condition, and often engage a range of professionals. 

A building consultant will aid in estimating the damage of a commercial property, for example, and if a business interruption (BI) is involved, a forensic accountant can be authorized to begin resolving the BI claim. Engineering service providers, such as EFI Global, can assess structural soundness, while contractors from Sedgwick’s repair solutions division can complete temporary repairs that protect property from further damage.

Due to the layers of desecration tornadic activity can cause, related claims are typically multifaceted, complex and can extend through long durations of time. If a residential home or commercial warehouse is partially destroyed, there are comprehensive procedures to repair and restore the property to its pre-loss condition. There will be several phases, including multiple inspections: the initial inspection, additional inspections with expert involvement, the monitoring of repairs, and a final inspection before concluding the claim.

Well-kept communication is integral — between the insured and the adjuster, as well as between the adjuster and the property’s insurance carrier. It’s critical that each claim is handled with a caring, empathetic touch.

Heightened urgency

Severe weather events, particularly tornadoes, involve circumstances that create heightened stress and urgency. If the homeowner avoids physical injury during the event, they may still have sustained psychological trauma — on top of the property damage and potential loss of treasured personal items. Those affected by a tornado’s destruction need immediate reassurance that they’ll overcome the devastation.

To that end, it is critical that adjusters provide a quick and immediate response — within the same day, wherever possible. It is their job to instill confidence in the insured that they are taken care of and will continue to be throughout the claims process. Contact should occur immediately to put the insured’s mind at ease, as should visiting the loss site to inspect the scope of damage. 

When did the adjuster make contact? How soon after did an inspection follow? How efficiently was the first report submitted? For a commercial property, how quickly is the BI payment received, so the claimant can get back to business? Not only do insurance carriers track this information to ensure optimal service is being provided, but the insured is wondering too; these questions are integral to the insured’s timeline of life’s return to normalcy. 

Of equal importance, adjusters should walk the insured through the various parts of the claims process — step by step. Knowing what comes next can provide a critical sense of comfort and assurance to an insured who just lived through an unforeseen event.

Capacity to respond

It is impossible to perfectly pre-arrange staffing for weather events, as storms often change course, defy predictions and in some cases occur without warning. As multiple catastrophes can happen simultaneously in different areas, capacity must be expansive to meet customers’ immediate needs. It is particularly beneficial to engage an organization with a nationwide network of experts. Sedgwick has adjusters scattered country-wide who are at the ready when disaster strikes.

Learn more:

  • Visit the CAT resource center to explore Sedgwick’s catastrophe (CAT) planning and response solutions, including temporary housing, contents and inventory, repair, engineering and more. 
  • Check out EFI Global’s website to learn about their 24-hour CAT response services.

Troy Dowdy, Senior Vice President – Mid-Atlantic Region, Sedgwick, and Tony Baddour, Vice President – Mid-Atlantic Region, Sedgwick

Cyber business interruption claims: the unique challenges of the digital realm

March 20, 2024

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Asia is home to more than half of the world’s internet users. Businesses are leveraging Asians’ online activity to make inroads to new and existing customers, create new products, and make processes more efficient. The benefits of this opportunity are accompanied by unique risks not addressed by traditional business interruption (BI) insurance policies. However, they can be managed with BI cover from standalone cyber policies. 

As we move from the physical to the digital realm, cyber BI claims present unique challenges –some familiar, some different, and others dramatically different from traditional BI claims. 

The familiar

As with all insurance claims, a causal link between the incident and the loss must be established. This is known in traditional BI as the material damage proviso. Cyber BI policies are similar, but instead of damage, cover may be triggered by an actual or suspected compromise to a policyholder’s IT systems. For losses to be covered, they must flow from an insured incident. 

The types of cover that both traditional and cyber BI policies provide are also quite similar. Cover may be provided for on a gross revenue or gross profit basis and on the basis of increased costs of working. The aim, therefore, is to place the policyholder in a position but for the cyber incident. These incidents can be either malicious (say, a data breach or malware) or otherwise (perhaps due to accidental acts or omissions). The challenge, as always, lies in isolating the loss solely to that caused by the incident.

The somewhat different

Some subtle differences are noticeable when considering losses under a cyber policy. The indemnity period for a traditional BI policy typically starts when a physical loss occurs. However, with cyber BI policies, the start depends heavily on the policy wording; it could be the assessed time of a system compromise, or the time a security incident report is made. This is subject to the expiry of a defined waiting period (i.e., time deductible), usually about 12 hours. While this sounds like a short time, it may prove to be a costly eternity for an online retailer during a major sale like on Singles’ Day. 

Cyber BI policies generally have maximum indemnity periods of about three months, which is significantly shorter than the 12 months we commonly see in traditional BI policies. This reflects the shorter nature of many cyber incidents, which can be resolved faster through, for instance, a backup restoration. However, it can be challenging to identify and rectify the point of failure in a complex IT system, despite having the assistance of a dedicated incident response team. 

The very different

Since the underlying assets are intangible in nature, some major differences arise. Here are two worth considering: 

  1. Ransomware attacks

While not new, ransomware attacks have become increasingly prominent and complex, making it more likely that a business may face disruptions. Data may be stolen or access to it blocked (or some combination thereof), with the extortionist threatening to release, destroy, or block access to confidential data unless a payment is made. The average ransom in 2023 was reported to be US$1.54 million, nearly double 2022’s figure.

In certain instances, paying the ransom may seem the cheapest and most effective option. Some policies even indemnify a policyholder for such payments. The final decision on whether to make a payment lies with the business — but, should they pay?

While it may be tempting to give in to the demands in the hopes the data is restored quickly, the evidence does not support this. Approximately one in four that pay never recover their data, and even if some data is recovered, most organisations take more than a week to recover from a ransomware attack. There is also no guarantee of an end or resolution to the attack — a point echoed by the 48-nation Counter Ransomware Initiative that strongly discourages such payments. Payments could also serve as a source of funds for criminal activities and provide further incentive to commit future attacks. 

Businesses must decide whether it’s in their best interest to decline making a ransom payment. Should insurers support the decision not to pay, cover would generally extend to recovery costs and any loss of revenue directly resulting from the attack.

As ransomware attacks may be financially costly and cause significant downtime, it would be sensible to proactively prepare for such an incident. These measures may include:

  • Ensuring backups and redundancies are in place and current
  • Conducting regular IT audits
  • Mandating strong passwords and multi-factor authentication
  • Conducting regular IT training and education
  • Developing incident response plans that can be mobilised quickly if needed 

Such plans are only effective if they involve the efforts of the whole organisation.

  • Reputational damage

Following a cyber-attack, public perception of the targeted company may be affected — particularly when sensitive customer data is compromised. Customers may question the company’s ability to protect their personal information, leading to a loss of trust and loyalty. Service outages can also cause users to switch to a competitor promoting its reliability.

Many cyber BI policies provide cover for reputational damage, reimbursing insureds for financial losses arising directly from the incident. Cover for reputational repair costs may also be available to hire PR consultants to mitigate the effects of adverse publicity. The difficulty lies in measuring and attributing the loss of current and prospective customers to the incident. Further, since many cyber policies have short maximum indemnity periods, the ongoing reputational damage beyond this period would not be covered by the policy. 

The jury is still out on whether news of cyber incidents has become so commonplace that a business’s reputation is indeed damaged. People tend to view businesses holding a high degree of trust as more susceptible to reputational loss. An online bank, for example, would be more prone to reputational loss than an online retailer. 

As with ransomware, a proactive approach to managing reputational damage may be more effective and efficient than a reactive stance. In addition to the measures listed above, the cornerstone should be clear and effective stakeholder communication — key to rebuilding trust and defending reputations. 

Conclusion

Cyber BI claims share some characteristics with their traditional BI counterparts, but the digital realm raises some unique questions. When a business is faced with a cyber BI loss, it’s critical to engage a trusted partner with expertise in the nuances of cyber BI claims to help them mitigate its wide-ranging impact.

Learn more — read about Sedgwick’s forensic accounting services and business interruption capabilities in Asia or email [email protected] for further information

Gerald Cheang, Senior Manager, Forensic Accounting Services, Asia

Navigating the temporary housing market when catastrophe hits

February 5, 2024

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Catastrophes like floods, fires, earthquakes, tornados and hurricanes can cause widespread property damage — suddenly forcing families out of their homes and in need of temporary housing. Many of those displaced are eligible for coverage of their temporary housing and additional living expenses through their homeowners insurance policies; our temporary housing division is dedicated to serving the needs of this population, along with the insurance professionals and emergency personnel who take care of them. 

Catastrophic events can wreak havoc on the availability of local temporary housing. But even under normal conditions, temporary housing markets have grown in complexity in recent years — making it ever more important to have an expert partner on your side that understands the nuances of the space and has established networks from which to draw. Here, we will highlight some of the trends impacting the short-term housing market and the temporary housing challenges that may arise in the aftermath of a catastrophe.

Market trends

The U.S. rental market has changed dramatically since COVID. During the pandemic, people avoided shared spaces like hotels to avoid getting sick. The risk of illness, combined with widespread hotel staffing shortages, prompted travelers to instead stay in vacation rentals — significantly driving up demand and rates on websites like Airbnb and Vrbo. Many guests found rentals to be more comfortable and convenient for their families and pets. 

Today, hotels are still struggling with staffing issues and have reduced their hospitality amenities as a result. Data shows that travelers who grew accustomed to vacation rentals during the pandemic continue to prefer them over hotel stays. 

At the same time, several factors are curbing the available supply of vacation rentals. Today’s rising mortgage rates and construction costs are creating barriers to ownership of rental properties. Additionally, many jurisdictions are enacting laws that restrict homeowners’ ability to operate short-term rental properties without proper permits. This became a significant issue in New York City in September 2023, when the area experienced severe flooding following Tropical Storm Ophelia and displaced residents struggled to find temporary housing.

Changing tides affect temporary housing

Consumer preference for vacation rentals over hotels can pose challenges when it comes to insurance coverage of temporary housing. Increasingly, displaced policyholders are requesting (and expecting insurers to provide) vacation rental accommodations rather than hotels in the immediate aftermath of damage to their homes. The issues here are threefold:

1. Vacation rentals are generally more expensive than hotels — especially when temporary housing partners can secure hotel discounts through their established networks. Use of vacation rentals for temporary housing often increases claim costs.

2. Homeowners insurance policies may dictate set allowances for coverage of temporary housing and additional living expenses. Policyholders who choose vacation rentals over more cost-effective options are likely to exhaust their allowance before their damaged homes are inhabitable again.

3. Families who will be out of their damaged homes for extended periods generally transition from short-term emergency housing to a home or apartment with a limited-term lease (6-12 months, etc.). When policyholders start out in a vacation rental, rather than a hotel room, they tend to settle in and don’t want to move to more cost-effective leased properties, which may offer equal or lesser amenities. 

Part of our role as a temporary housing partner to the insurance industry is to stay on top of economic and consumer trends in the housing market and how they impact our carrier clients. With an understanding of the cost factors and psychographics, we can provide professional guidance to insurers on how to navigate these issues and communicate effectively with their policyholders to ensure the best outcome for all involved parties. 

Maui fires: location-specific challenges 

In August 2023, wildfires ravaged the Hawaiian island of Maui — killing 100+ people, destroying over 2,000 buildings, causing around $5.5 billion in damage, and leaving more than 7,000 people homeless. Temporary housing for Maui’s displaced residents was (and, months later, remains) a dire need.

The post-wildfire housing crisis in Maui has been compounded by factors that far exceed the standard challenges of a CAT event. The whole island is about 730 square miles (1,880 square kilometers) and inter-island travel is not easy, so available resources are limited. Because Maui is a high-end tourist destination, hotel rates are pricey. Additionally, a large percentage of Maui’s residential properties are vacation rentals, and many homeowners hesitated to commit to longer-term guests for fear of losing out on peak-season tourism income. (Financial incentives provided by various government agencies are helping in this regard.) 

Despite the many obstacles, the Sedgwick temporary housing team has helped hundreds of displaced Maui residents in their time of need. Thanks to our 24/7 concierge service, established relationships with hotel chains and strong network of contacts in Hawaii, we’ve worked with multiple insurers to secure safe short- and long-term accommodations for their policyholders. Our team has also assisted in setting up leases for dozens of families so they can be settled until their homes are rebuilt. Our 27 years of experience in post-catastrophe temporary housing have served us well in identifying creative solutions to seemingly insurmountable challenges in the aftermath of the devastating wildfires. 

In it for the long haul

Building materials must be imported from the U.S. mainland or Asia. And in an environment with many competing for limited resources, the rebuilding of structures contributing to the island’s economic recovery may take precedence over single-family homes. 

Regardless of how long the recovery takes, Sedgwick is committed to being there to support our clients and their policyholders on Maui. If we can be of assistance to you, please contact our temporary housing team at [email protected]or our property loss adjusters at [email protected]

Learn more — watch this video and read this flyer about Sedgwick’s temporary housing solutions, and visit our CAT resource center to explore our catastrophe planning and response solutions

Delivering flood resilience: minimising the impact of flood claims

January 15, 2024

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One billion people globally are at risk of experiencing a flood. In the UK alone, an estimated 5.2 million homes and businesses are at risk. And the probability of flooding is increasing with climate change. Increased winter rainfall — projected to increase 35% by 2070 — and more severe weather events will exacerbate an already untenable set of circumstances.

The impact of flood risk on businesses is also troubling. In the UK, once a flood hits and affects a business, only 60% of them ever re-open their doors. And for businesses that do, each flood claim entails, on average, 50 lost days of business. Meanwhile, government strategy is shifting, with a newfound acceptance that ‘we can only reduce the risk in some places,’ rather than eliminate the risk altogether.

Now, more than ever, we must harness solutions to proactively mitigate flood risks wherever possible.

Do you know the flood risk for your assets?

Investing in flood resilience is driven by an awareness of the flood risk by the key stakeholders (e.g. building owner / occupier / insurer / lender). For property owners, that means assessing a wide range of factors.

What sources of flooding are in the vicinity of the building? What are the flow routes and hazards i.e., how would the water flow to reach the building or asset you’re trying to protect? What’s the history of flooding at the property? Would potential floodwater likely be contaminated i.e., is a water source nearby fresh, or contaminated with sewage or farm waste? What’s the estimated frequency, duration and depth of potential floods specific to the property?

The basics of flooding

Each type of flooding has unique implications. Pluvial, or surface water flooding, occurs when the ground can’t absorb the water fast enough, so it runs over the surface. Fluvial, on the other hand, occurs when streams, rivers or small ditches overflow. Groundwater flooding occurs when the ground is completely saturated with water, and the water has nowhere to go. Finally, tidal flooding is the temporary inundation of coastal areas or areas around rivers during exceptionally high-tide events. An area not often considered is the risk of sewage backflow into a property when the combined foul and surface water system is overwhelmed. Compound flooding is a combination of any of the above flood types.

It may be counterintuitive, but more properties are at risk from surface water flooding than that flowing from a river or sea. If rainfall is prolonged or intense enough, and the ground can’t absorb the water it will flow over the surface and may flood properties which are often thought to be at low flood risk. 

Property flood resilience in practice

Property flood resilience (PFR) is a broad term capturing measures which minimise the impact of flood water on a property or asset — these can be both permanent measures built into the property or temporary measures deployed in a flood. 

PFR is two-fold: resistance measures, or those that reduce the amount of water entering a building (e.g. flood doors/barriers/automatic air bricks), or recoverability measures that limit the damage caused if water does enter a building (e.g. kitchens / floor and wall finishes not damaged when they get wet). The trick is in balancing both measures, and determining which are most effective and timely for a specific property.

When delivering flood resilience, there’s an important and clear methodology UK professionals follow: the code of practice (CoP) for property flood resilience (C790F), published by the Construction Industry Research and Information Association (CIRIA), an independent not-for-profit organisation.

The CoP lays out a six-stage approach that qualified surveyors should follow for effective delivery.

  • Flood hazard assessment – an assessment that reviews flood risk for the property; determines likely frequency, depth, severity and overall susceptibility to flood.
  • Property survey – a property survey and assessment of existing resilience (conducted by a qualified skilled surveyor).
  • Options development – deciding on PFR strategy and creating associated, detailed flood resilient design.
  • Construction – installing PFR products by appropriately skilled contractors or specialists.
  • Commissioning and handover – a post-installation audit conducted by an independent third-party surveyor confirming that measures operate effectively.
  • Maintenance – assigning responsibility for ongoing operation and explaining to customers how to maintain measures.

A separate document, ‘making your property more flood resilient’ (CIRIA C70C) is a helpful resource for home owners or business owners interested in at-home flood resilience guidance.

The importance of winning over customers

Much of the at-risk population in the UK doesn’t actively adopt mitigation measures even when they’ve been impacted by multiple flood events. Recent research found there are several psycho-behavioural barriers that subconsciously influence a person’s likelihood to pursue flood risk mitigation.

According to research commissioned by the Environment Agency, there’s a widespread lack of awareness among the public of the true extent of risk facing their properties. 

Many participants view themselves as being insufficiently at risk to justify any sort of flood mitigation investment. To that end, many misunderstand risk rates entirely. If a surveyor identifies a 1 in 33 annual flood probability, for example, many assume this means the property will experience a flood once in every 33 years on average. It actually means there’s a 3.3% chance of flooding each year — revealing the true risk to be much higher than perceived. This is made worse by homeowners and businesses not wanting to accept that there’s an ongoing risk.

Additionally, most participants didn’t feel empowered to act and had poor knowledge of which PFR measures were available to install. Self-efficacy also proved important in participant decision-making; those who felt confident in their ability to carry out PFR measures were more likely to do so. 

It’s critical to help customers understand their risk and further establish their appetite for risk. Customers must be able to understand the cost-benefit analysis of how much risk they might be willing to accept, and how much they’re willing to invest to protect their property. We must collectively distance ourselves from the belief that only properties near a river, or only properties in certain environments are at risk. All properties can be at risk — and the time to mitigate, using a holistic and strategic approach, is now.

Some of these concepts were previously shared in a recent webinar presented by Ian Gibbs.

Sedgwick appoints Jonathon Vaisey as Head of Major and Complex Loss Property in Australia

January 10, 2024

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SYDNEY, 12 January 2024 — Sedgwick, a leading global provider of technology-enabled risk, benefits and integrated business solutions, has appointed industry expert Jonathon Vaisey as its Head of Major and Complex Loss Property to lead growth, develop capabilities, performance initiatives and client relationships in Australia. 

Vaisey brings over 20 years of experience as a chartered loss adjuster with expertise in the investigation and management of complex property claims. He has an extensive background handling major loss claims in health, education, manufacturing, agriculture, retail industries while working on major losses throughout Australia and the Asia Pacific region.

“Highly regarded for his experience as an executive adjuster and business leader, Jonathon also has a tremendous passion for mentoring colleagues and developing their technical capability through quality management frameworks,” said Jason Wyer, Sedgwick’s General Manager of Property in Australia. “His expertise and leadership in the Australian market will support the needs of our colleagues and clients in managing major and complex losses.”

Using Sedgwick’s leading operating model — the “Art and Science of Loss Adjusting” technical competency framework — Vaisey will ensure the delivery of optimum services to current and prospective clients. Investment in colleague development and performance as well as optimisation programming are cornerstones of the model’s success. 

“I look forward to helping support our clients’ needs and the company’s long-term growth as we continue to develop our major and complex capabilities,” Vaisey said. “We have an incredible team of specialist adjusters with the resourcefulness and ingenuity to take good care of people and businesses across Australia when it matters most.”

About Sedgwick
Sedgwick is a leading global provider of technology-enabled risk, benefits and integrated business solutions. The company provides a broad range of resources tailored to clients’ specific needs in casualty, property, marine, benefits, brand protection and other lines. At Sedgwick, caring counts; through the dedication and expertise of 33,000 colleagues across 80 countries, the company takes care of people and organizations by mitigating and reducing risks and losses, promoting health and productivity, protecting brand reputations, and containing costs that can impact performance. Sedgwick’s majority shareholder is The Carlyle Group; Stone Point Capital LLC, Caisse de dépôt et placement du Québec (CDPQ), Onex and other management investors are minority shareholders. 

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Weathering the winter storm season in the U.S.

January 9, 2024

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Millions of people across the U.S. are at risk as winter storms led to power outages, freezing pipes, dangerous roads and more. As the 2024 winter weather season unfolds, what should insurers, property owners and vehicle owners keep in mind? In this podcast, two of Sedgwick’s experts, Nicole Bartunek, client services manager and Andy McCallum, VP, specialty operations, discuss the major risks during this time of year and how to mitigate them.

Scotland’s hydro-electric schemes, severe flooding and insurer implications

December 21, 2023

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Hydropower has played a critical role over the past century in connecting vast swathes of rural Scotland to the power grid, all by using its plentiful natural resources to generate electricity: steep mountains and hillsides, lochs and reliably heavy rainfall. Scotland now provides 85% of Great Britain’s hydro-electric resource, with a total generation capacity of 1,500 megawatt units (MW). 

In recent years, there’s been a notable growth in small-scale hydro-electric schemes — that typically generate ~6 MW — installed by estate and property owners in the Scottish Highlands. The schemes take advantage of the hilly slopes and water runoff to generate clean energy, while simultaneously raising revenue and positive cash flow to offset the property’s expenses.

But as climate change perpetuates extreme weather events in both size and frequency, property owners and insurers alike face an unprecedented challenge: contending with the impacts severe flooding events are having on small-scale hydropower schemes. Is this renewable energy source truly insurable, and are the assets built robustly enough to withstand intensive weather patterns to come? 

The innerworkings of a hydro scheme

A typical small hydro-electric power scheme comprises a turbine and electrical generator positioned within a pump house located at a low-level where water run-off is collected. The water run-off flows into a mechanical turbine (essentially a propeller) resulting in its rotation and the production of hydro energy utilised to power an electrical generator. 

By nature, a pump house must be located at the bottom of a hill — as water flowing downhill is the mechanism that powers the turbine. As a result, there’s always potential exposure for the pump house to become flooded. 

Flooding is highly problematic for several reasons. Electrical assets, like the generator and control panels, can easily be damaged or destroyed altogether by floodwaters, necessitating costly repairs or full-on replacement. Secondly, it can render a scheme unusable until fixed properly, amounting to a costly business interruption (BI) during the period — often several months at a time — that energy generation is suspended.

Any viable solution would be as costly — if not more so — than bearing the consequences when flooding occurs. Either engineers must redesign pump houses to be more robust, or property owners must invest the necessary funds to install flood resilience measures and ensure a pump house is as watertight as possible. Few mitigation options remain in between. 

Climate change exacerbates severe weather patterns

Climate change continues to affect Scotland’s natural environment. Over recent decades, Scotland has experienced a warming trend that has both shifted rainfall patterns — including higher average annual rainfall and an increasing proportion of rain falling during heavy rainfall events — and contributed to rising sea levels. 

An evidence report, the third UK Climate Change Risk Assessment (CCRA3), found that the risk of flooding to people, communities and buildings remains among the most severe risks for Scotland and is the costliest hazard to businesses. It also found that water, energy and transport infrastructure networks are at imminent risk of “cascading failures,” and infrastructure services are at risk of river and surface water flooding. 

Such risks are expected to become more dire year by year. According to a March 2023 report published by the UK’s Climate Change Committee, by 2050 the UK is expected to have ~5% wetter winters on average, ~10% increased intensity of heavy rainfall, and a 10-30 cm increase in average sea levels — all making way for more acute river, surface and coastal flooding, and subsequent loss of transmission and distribution capacity due to flood damage.

Implications for insurers and insureds

For insurers, on the construction side, there is potential for large loss(es) to occur, and insurers must consider high-complexity risks to third-party property and the environment. Operationally, there is potential for large loss(es) to occur as well, due to inherent and environmental factors. Claims for small-scale schemes amount to around £1 to 2 million for site works, property damage works and BI. 

Insurers are increasingly concerned about policy limits, and if the BI sum insureds are high enough to cover a potential loss — particularly as energy prices soar. If flooding and subsequent damage occurs more frequently, insurers will ultimately need to decide: Is insuring hydropower assets disproportionate to the risk? 

Where hydro losses occur a multi-discipline team comprising of loss adjusters, forensic engineers, forensic accountants and environmental consultants with specialist training should be engaged. It’s critical to partner with an entity educated in emerging technology and local market/industry knowledge to assess repair versus replacement options and provide guidance.

Learn more — Read about Sedgwick’s recently-launched power and energy division in the UK.

Major and complex loss review 2023

October 19, 2023

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In the first eight months of 2023, the U.S. was hit by 23 separate billion-dollar disasters — the largest number ever recorded. In July, the earth experienced its hottest month in 174 years. We witnessed devastating floods in Libya, earthquakes in Morocco, Turkey and Syria, and unprecedented wildfires in North America. To all who are paying attention, one thing is clear: the frequency and severity of catastrophic events are rising.

Sedgwick’s ‘Major and complex loss review 2023’ highlights the importance of preparedness, as well as our unparalleled ability to respond quickly, efficiently and compassionately to major and complex losses. In every major loss, our team is immediately on site to provide help, practical support and advice. But we offer much more than that. By injecting energy and creative thinking into every process we’re a part of, we provide inspired, tailor-made solutions that deliver better outcomes.

You can read the full 2023 major and complex loss review here.

Recovering from dental practice losses without pain reliever

September 25, 2023

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The healthcare sector is evolving at an astonishing rate. Consider for example that it took biotechnology company Moderna just one hour in January 2020 to formulate an effective SARS-CoV-2 vaccine, based on their messenger ribonucleic acid (mRNA) technology. Advancements in technology are changing the dental field, too, but like other healthcare facilities, dental practices are not immune to property losses. In this commentary, we explore typical equipment found in a dental office, common perils, post-loss recovery options and how collaborating with manufacturers helps instill certainty.

Read EFI Global’s latest commentary paper. Click here.

Equipment contamination and quantification after a property loss

September 6, 2023

A panel of complex circuitry.
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Across various industry sectors and businesses, commercial electrical and mechanical equipment can be exposed to contaminants from fire, water and other perils. After a loss event, particulates often settle on susceptible surfaces — which can lead to deterioration and damage. Equipment consultants are trained to carry out repeatable scientific analyses to help clients navigate contamination claims. Foundationally, the goal is to assist the equipment owners, prevent surface degradation in the form of corrosion and rust, and rebuild confidence in the equipment once fully restored.

5 step process

Proper equipment evaluation with a view to minimize business interruption requires a detailed understanding of production needs, assembly of a triaged equipment priority listing, determination of the extent of potential damage, as well as extensive knowledge of analytical sampling, liability and subrogation. This process involves five key steps that equipment consultants adhere to closely.

  • Gather data about the environment. Post loss, the environment the equipment is exposed to can be benign or potentially detrimental. Quantifying temperature and relative humidity (RH) is a critical first step. If environmental control is necessary, controlling the temperature and lowering the relative humidity to between 45% and 55%, is the first preservation measure that can be employed quickly to prevent surface deterioration. Introduction of vapor phase corrosion inhibitor (VpCI) emitters into enclosed spaces, such as unvented control panels, is another method of controlling metal deterioration while the environment is being stabilized. VpCI technology emits vapors which form a molecular layer on metal surfaces to protect against corrosion — even in the presence of detrimental environmental conditions.
  • Utilize appropriate sampling methodologies. One size does not fit all. There are samples that are specifically designed to differentiate between soot, char and ash. This type of sampling methodology is important when trying to differentiate between wildfire ash and soot from incomplete combustion of carbon-based materials. Sources of such soot include unvented fossil-fired heating appliances, fireplaces, environmental contaminants, carbon from vehicle exhaust, and nearby factories.
  • Immediately determine which pieces of equipment may be restorable and which are a total loss. Commercial equipment is oftentimes made custom, which means procurement lead times can be substantial. As of the writing of this blog, lead times for electrical gear and some electrical components are 8 to 16 months. It’s therefore the consultant’s responsibility to quickly advise which equipment should be to replaced, allowing for purchase orders to be issued. It is also critical to immediately start collaborative discussions with manufacturers, to ensure warranties and service contracts are maintained, on equipment that can be restored.
  • Research restoration, repair and replacement costs, and present a recovery course of action. While some items needing replacement may be obvious — such as those consumed in the fire — the correct recovery course for others (particularly older items) may not be. Equipment consultants must assess costs to determine and recommend an appropriate restoration method that will restore production to pre-loss.
  • Report all findings. The consultants’ findings, recommendations, and research costs have to be published in a report that can be appreciated by all involved. Whether the equipment owners perform the recommended recovery activities or not, the insurance carrier and the policy holder should be able to reach a just settlement on the equipment side utilizing the published report.

Sampling methodologies: gathering particulate data

Several methods are used to collect contaminant samples, which are sent to a laboratory. Analytical wipe samples show the contaminant’s composition, help quantify the potential rate of deterioration as well as corrosiveness. Tape lifts help differentiate between combustion byproducts such as soot, char and ash. Gathering particulate data eliminates the need to speculate about what may be happening as a result of exposure. Conductivity meters help determine the likelihood of electrical short circuiting, which is critical when the equipment owners want to resume production before the equipment is restored.

Case study: ionic wipe sampling

A consultant was dispatched to a warehouse owned by the board of elections, where hundreds of voting machines — worth sixty million dollars — were stored. A snowplow parked in an adjoining garage caught fire and smoke spread throughout the facility. The board of elections sought replacement of all the voting machines to ensure future election results would not be disputed as a result of the loss event.

Soot settled on the external surfaces of the voting machines protective cases’. The consultant, together with the manufacturer, opened approximately 15% of the cases and sampled within the machines. Laboratory results showed that the machines internal circuitry cleanliness met the manufacturer’s standard, and therefore, none needed to be replaced.

Contamination and equipment susceptibility

Even if a facility is kept in immaculate condition, there could be pre-existing, or pre-loss contamination, present in the environment that’s wholly unrelated to the loss event. Examples include outdoor contaminants (such as dust or pollution), production byproduct or house-cleaning products. Contamination that is introduced during the loss event, can result from combustion byproduct, fire suppression activities, environmental factors or even drywall particulate borne from facility restoration activities.

Corrosion, a naturally occurring chemical attack on certain metals, can be exacerbated by newly introduced contaminants, causing deterioration of vulnerable surfaces. Dry (or chemical) corrosion can appear at high temperatures when the air’s oxygen reacts with susceptible metals — without the presence of liquid. Wet (or electrochemical) corrosion occurs when certain metals are exposed to water or elevated humidity, and the surface degrades through oxidation; in other words, it rusts.

Factors impacting the rate of corrosion include temperature, water exposure, pollutants and airborne particles such as salts (think of a hurricane bringing in salty rain from the Gulf Coast, which falls and agitates surfaces). Relative humidity, a key factor, must be lowered to between 45 and 55% as a preventive measure.

The first 24 hours

Following a loss event, it’s recommended to power off all equipment, and advance with the assumption that all equipment is susceptible to rusting. Engage entities that can lower the humidity appropriately to prevent corrosion. Build containments as necessary by separating non-contaminated equipment from contaminated ones. Next, apply a rust inhibitor on all exposed metals that have not been protected with a coat of paint — this mitigates deterioration. Do not apply oil based rust inhibiting products on electronic assemblies. Be sure to cover equipment before removing wet drywall, to prevent secondary exposure. Then the process of a thorough evaluation begins.

> Learn more — visit efiglobal.com or contact [email protected] for more information.

Summer is near and so are potential risks for boat owners

March 30, 2023

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As we move closer to boating season, small steps help determine whether a boat stays ashore. Each year, many of the injuries we witness post-loss occur when launching or at the start of the season as a result of some owners overestimating their boating skills. Although it is not possible to mitigate all risk, there are a number of steps you can take to minimize property damage and reduce the chance of injuries. 

Review your insurance policy

Before the season starts, it’s recommended that all boat owners review their policies to understand the type of cover they have. Do you have the appropriate cover based on your circumstance? Cases are constantly appearing in which policyholders do not quite know what they are paying for. As a boat owner, reviewing the terms of your policy on a routine basis is essential as terms are updated at regular intervals and you have the opportunity to change cover as needed.

Take safety measures 

If you were born before 1980, you can drive a boat up to 50 feet in size. However, it does not necessarily mean that one should do so. The driving test for boaters delivers knowledge in terms of navigation, seamanship, sea marks and the dangers to consider in the water. The test can be completed in a short time at a relatively affordable cost, so it can be considered the cheapest insurance you can purchase. 

Maintain the boat

To properly care for a boat takes time and work, but it becomes easier if you maintain it sooner rather than later. The most important step to take is to rinse the boat with a high-pressure washer as soon as it is on land. If the boat is given time to dry with dirt and grime, the cleaning job can be considerably more extensive. Boat workshops tend to have a long waiting time in the spring and if you want to take the boat in for service, the earlier the better. Another significant component to maintaining the boat is to consider your environment by sorting any waste and yourself, by using appropriate protective equipment for each task. 

When preparing a boat for the season, consider the following suggestions: 

  • Wash the boat

As one of the primary tasks, take extra precaution that self-bilges and drainage holes are free of leaves and dirt. Read the instructions for use on the detergent you use, wear chemical gloves, start at the bottom and wash upwards. It is beneficial to wash the superstructure and deck before starting the polishing, otherwise the power wash can destroy what you have already done. It’s also recommended to avoid too much scrubbing, Jif and other scouring agents. Rinse the boat with fresh water and preferably use a strong detergent that foams well. Apply with a sponge and bucket. Allow the detergent time to work, and you will avoid a lot of scrubbing. Even so, it is important not to let it dry too much either, because then there may be scabs that are difficult to remove. Rinse the boat thoroughly with fresh water after washing, preferably with a high-pressure washer. 

  • Check the hull

Start by checking whether the hull has damage in the gelcoat. Damage below the waterline is recommended to be repaired before bottom lubrication and polishing. Check the frames and bulkheads, they must be intact. For wooden boats, you should look carefully for rot on gangways, frames, bulkheads and bottom logs. Check for cracks and if anything stands out, carefully check transitions between keel and hull.

  • Polish properly

It is important that the boat is washed well, dried completely and rubbed before starting to polish. Using a polishing machine on the lowest speed is recommended. Do not apply to surfaces larger than, for example, 80x80cm, and work horizontally and vertically. Polishing in direct sunlight is not ideal. A RIB should be put in with “sun cream” to protect the pontoon several times during the summer. This is a sealer or a wax-based coating that creates a film to protect against, and salt water and stains.

  • Protect bottom material

Regardless of whether you are going to apply a base material or not, it’s recommended to go over the bottom of the boat with water sanding paper. If necessary, find a bottom material that suits your use and your boat and apply every two years. The bottom must be flushed and cleaned every year.

  • Inspect engine and propeller

While professionals take care of full inspections, boat owners can complete a visual check of the engine and compartment for damage, leaks or other things that indicate something may be wrong. You can also check the engine’s oil and coolant level, as well as the battery voltage. Complete a review of all lubrication points and feel free to lubricate wire transmissions and moving parts. Check cables, hoses and look for breaks and wear. Finally, you can check and clean the filters in the engine.

  • Ensure the battery is charged

The battery is considered discharged or damaged if it has less than 12 volts. If the battery is slightly over 12 volts, it is about half full. A fully charged battery should have approx. 12.7 volts.

  • Check the safety equipment

Every year, there are many boats that start to burn and it can escalate quickly. The first priosity is to have the appropriate equipment in the boat and the second priority is to know how to use it. It is a good rule to check this in connection with the boat cleaning in the spring, in addition to fire alarms, gas detectors, extinguishing equipment and lifejackets. On the inflatable lifejacket, you should check the gas cartridge, trigger tablet and whether the vest is tight. Not all vests are inflatable, and on the normal vest it is important to ensure that all seams are intact — whether the vest is adapted to your weight, shape and whether it has a crotch strap. Writing the date on the vest for when you last checked it is recommended.

  • Remember the bottom plug and enlist help during and after launching

When launching, it’s not recommended to drive a boat on a trailer if you do not have a license to do so. There are significant forces in turning and speed bumps have damaged many boats. Always fasten the boat securely to the hanger with at least three straps. Before you back into the water, if necessary, remove the electric plate at the back and pull out the connector between the trailer and the car. Back out into the water, but not so far that the water comes over the hub of the trailer wheels. Remember the handbrake, so you don’t launch the boat and car. When the boat is safely on the water, the car is driven with a trailer out of the water and deserves a thorough flushing with fresh water. Spray all electrical contacts with moisture repellent spray.

When the boat is on the water, check all hull penetrations for leaks. Test winches, drives, flaps and rudder. Check that the battery is being charged by the engine, and that the engine has cooling. Rubber impellers can become hard and often crack when left on land to dry. After running the engine for a while, check for leaks of oil, fuel and cooling water, as well as the oil level.

Boating season is upon us and the risks are too. To minimize property damage and reduce the chance of injuries, it’s recommended to review your policy, take safety precautions, and do your due diligence to maintain the boat. Sedgwick is ready to take care of clients and their insureds throughout boating season and beyond.