Hurricane Florence is still hundreds of miles off the U.S. East Coast, but insurers are starting to see their potential costs from one type of claim mount as companies halt operations to let employees flee.
Mass evacuations in the Carolinas and Virginia are starting the clock ticking on business-interruption insurance policies, which help replace lost income for companies when natural disasters strike. Hartford Financial Services Group Inc. and FM Global are among insurers with exposure in the region that are sending staff to help with anticipated claims.
“You’d have to expect, just based on the forecast, that it’s going to be a significant impact to businesses,” including prolonged disruptions, said Rick Miller, head of the U.S. property practice at Aon Plc. “Certainly businesses that take a direct hit, their facilities could be impacted for months.”
Making matters worse for insurers, forecasters say that Florence may stall over land, potentially dumping rain for days and causing power failures. The storm, expected to make landfall late Thursday or early Friday, may trigger “catastrophic flash flooding,” the National Weather Service said. Companies from agricultural firm Cargill Inc. to carmaker Daimler AG suspended operations in Florence’s path.
Florence could become the most powerful storm to hit the area in more than 60 years if its intensity continues. One estimate pegged the potential total costs of the storm at $30 billion.
Florence has dragged down shares of insurers. Allstate Corp. and Travelers Companies Inc. are both down by more than 2 percent this week through 10:30 a.m. Wednesday in New York. Hartford is down 1.3 percent. The Standard and Poor’s 500 Index is up less than 1 percent in the same period.
As Florence closes in on the U.S. East Coast, its track has shifted slightly to the south, threatening to batter a wide swath of coastline as it makes landfall near Myrtle Beach.
Banks are among companies curtailing operations. Already by Tuesday afternoon, PNC Financial Services Group Inc. had closed 24 branches in the Carolinas and coastal Virginia, according to spokeswoman Marcey Zwiebel. Wells Fargo & Co. closed 20 North Carolina and Virginia branches and announced plans for 46 other early closures in the Carolinas, spokeswoman Ann Wasik said.
While the early evacuations could boost business-interruption claims, they can also allow firms the leeway to button up properties ahead of the storm.
“The better prepared anybody is, it can potentially reduce the impact of the claims if you can better harden your facilities against damage,” said Robert O’Brien, a managing director in the national property-claims practice at Marsh, a unit of Marsh & McLennan Cos.