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Risk in Context

Learning Harvey’s Lessons: How Chemical Companies Can Better Respond to the Next Major Storm

Posted by Mary Russell July 31, 2018

Last August, Hurricane Harvey roared through Texas and Louisiana, causing widespread damage to companies across several industries. But it had an especially profound effect on chemical companies, many of which were unprepared for the storm and suffered severe flooding losses and disruption. With this year’s Atlantic hurricane season already underway, here’s how chemical companies can ensure they’re better prepared for a major storm in 2018.

Staying Resilient

Many chemical companies already have preparedness plans in place, but not all are truly resilient. To prepare for future storms, businesses should consider:

  • How flooding, high winds, downed power lines, damage to roads, and orders by civil authorities could limit access during and immediately following a storm. 
  • The resource damage, chemical releases, or unexpected movement of storage drums or containers that rising floodwaters can cause, which can create liabilities in the communities where operations are located and employees live. 
  • Communications challenges, including disruptions to mobile phone networks, which could delay resumption of normal operations for some companies. 
  • The strategies needed to meet customer and investor needs and remain operational, and when to execute them — as a storm is approaching, when it’s imminent, and when it’s passed.

Risk Assessments

Some organizations might think that if they meet federal regulatory standards, they can call themselves resilient. But meeting minimum standards may not be enough to protect against a storm. Federal regulators, for example, do not require that chemical companies consider flood insurance maps in their preparedness plans.

A detailed risk assessment can help you examine your existing hurricane response strategies and improve upon them. Among other areas, look at your emergency response and planned actions ahead of a storm, including relocating sensitive equipment and materials and putting up temporary barriers to protect locations from floodwaters.

Also consider how you’re aligned with third parties, including others in your community. For example, catalog the potentially volatile materials you have on-site now, so you don’t hinder the response of your organization, your neighbors, and first responders in a storm’s aftermath.

Insurance Considerations

Ahead of the next storm, take stock of the insurance coverage you currently have in place. Several forms of coverage could respond to a storm, including property, flood, business interruption, and contingent business interruption coverage; environmental liability; workers’ compensation; and general liability.

You should also consider alternative solutions. For example, many large chemical companies own their own captive insurers, which can yield premium savings, accelerated claims payments, and broader coverage. Weather-based and other parametric insurance solutions can also offer valuable coverage. Such products can be triggered by specific conditions like wind speed, time, and distance — for example, a policy could be designed to respond to 75 mile-per-hour winds sustained for a short period of time within 10 miles of an insured location.

Another storm of Harvey’s size could severely disrupt the chemical industry or in a worst-case scenario, put some companies out of business. But taking these steps ahead of the next hurricane can better position your organization to minimize operational impacts and help you survive.

Mary Russell