Commercial properties are also vulnerable to disasters

When our country is hit by a hurricane, tornado or earthquake, we primarily think of how people and their homes will be affected. There are far more residential structures than commercial buildings in the U.S., so they are more likely to be affected by disasters. However, commercial properties also face substantial risks from severe weather and other natural events.

Commercial buildings come in a wide range of types and sizes, and insurance carriers need to be able to accurately calculate replacement costs for all of them. This depends on a thorough understanding of the structure, from the foundation and type of construction to plumbing, fire protection and HVAC systems.

Of course, business and property owners need to play a proactive role in ensuring that they have the appropriate coverage. Unfortunately, surveys administered by Staples show that many commercial businesses may not be putting much of a focus on disaster preparation.

The survey found that 50 percent of U.S. workers believe their company is prepared for a "severe emergency." However, about 60 percent said their companies have not reassessed their contingency plans in the wake of recent disasters. Continually updating and improving an existing plan is critical to being prepared for a crisis, a point made recently by David Paulison, former director of the Federal Emergency Management Agency (FEMA).

Paulison spoke at the annual meeting of the Public Risk Managers Association in June. He described his experience taking control of FEMA after Hurricane Katrina, when the agency's performance was facing widespread criticism. He recruited experienced crisis managers and worked to instill a focus on active response operations at the organization.

FEMA continues to take proactive measures to manage the risk of natural disasters. For example, the agency has been using new modeling technology to update its flood risk maps, increasing the size of high-risk zones in many regions. Coastal cities have been significantly affected. In Boston, the updated maps put more than 3,000 thousand businesses in expanded Special Flood Hazard Areas that now stretch deep into the city's downtown and financial district. These changes can affect property values, insurance coverage needs and premiums.

Insurers, commercial property owners and business leaders need to collaborate to keep up with evolving risks. Research from Munich Re shows that, between 2000 and 2011, insured losses stemming from natural disasters in the United States averaged about $27 billion per year. If commercial property valuations are not calculated accurately, property owners may not be covered for the full cost of repairing or replacing their structure in the aftermath of a natural disaster.