Category Archives: Disaster Preparedness

Learning from Katrina

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hurricane katrina

As we look back upon the fifth anniversary of worst hurricane in U.S. history, two windstorms churn through the Atlantic. The first, Danielle, fortunately veered away from the coastline, its destructive power withering by the hour. The second, Earl, on the other hand, is strengthening, with sustained winds already reaching 135 mph and a trajectory that has the whole Eastern Seaboard on watch.

Katrina taught us many things about disaster preparedness and response. It gave us vivid, appalling visions of a new worst-case scenario. Even more powerfully, Spike Lee put together two gripping documentaries that unveil the true, long-term magnitude of the tragedy, the second of which, If God Is Willing And Da Creek Don’t Rise, recently premiered on HBO and is a much-watch look into just how much the city has suffered — without crumbling — since the floodwaters receded.

At Risk Management magazine, ever since the storm, we have tried to tell some of the city’s other stories. I wrote an article about the New Orleans Museum of Art’s harrowing days after the storm and the commando art restoration team that saved collections throughout the city. Another story detailed how a casino risk manager in the midst of a major merger had to deal with $1 billion in lost property after his company’s riverboat was thrown 2,000 feet by storm surge. And we tried to find some semblance of a silver lining by offering these lessons that all of us can learn from a disaster of this magnitude.

Unfortunately, it seems as though few lessons have actually been learned. Oh, they have been discussed ad nauseum and the outrage expressed has generally been genuine. But actual behavior has largely remained unchanged. Still, most people admit that they are unprepared for disasters.

Hopefully, most companies and organizations are more confident. But many are not — or at least have no cause to be. Along these lines, we plan to spend the rest of this week (and much of September, which is National Preparedness Month) remembering what happened on August 29, 2005, and emphasizing the importance of disaster preparedness and response.

I encourage you to click some of the links above and check back soon for more.

Hurricane Earl Projected to Possibly Strike Northeast

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There is a fictional book titled Landstrike that details the scenario of a disastrous hurricane striking the New York City area. From the book’s website:

Someday, a major hurricane will strike New York City. Government forecasters concede they’ll be unable to give the City much notice, while the City’s emergency planners admit evacuation is impossible. It’s a recipe for disaster on a scale to dwarf Hurricane Katrina’s devastation of New Orleans, potentially leading to the largest natural catastrophe in American history.

As we all know, NYC is very much unprepared for the type of storm that frequents the warmer waters of the Gulf of Mexico.

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Some may recall the story of the Great Hurricane of 1938 that struck eastern Long Island and New England, killing more than 700 people, destroying more than 50,000 buildings and knocking down more than a quarter billion trees.

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If a serious hurricane were to strike the NYC area today, it would undoubtedly be one of the most costly natural disasters in U.S. history. As the Insurance Information Institute states, New York has the highest total exposure to a storm.

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Not to be a fear monger, but now let us look at the projected path of Hurricane Earl, courtesy of the National Hurricane Center (NHC). I understand that this is a projection through Saturday, which, when talking about the path of storms, is long-term and certainly not definitive.

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Still, the image is frightening (note how close to NYC the storm is projected Friday afternoon/evening):

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Moments ago, Hurricane Earl reached category 3 status with winds near 120 mph, according to the NHC. We will keep an eye on updates from the center.

This is a good time for businesses to review their business continuity and disaster preparedness plans. There is no such thing as being too prepared.

Demand for Oil Cos To Prove Disaster Preparedness

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In a likely move, investors are demanding improved disclosure of oil disaster response plans. In fact, 58 investors representing $2.5 trillion in assets came together recently to demand just that.

The group penned a letter to G. Steven Farris, chairman and CEO of Apache, a company that recently purchased $7 billion of oil and gas fields from BP. As the letter states:

“The April blowout at BP’s Macondo well in the Gulf of Mexico, and the explosion and fire on the Deepwater Horizon drilling rig that killed 11 workers, has led to one of the greatest environmentally-related destructions of shareholder value in history. The shareholder harm that has flowed from the BP spill has focused investor attention on governance, compliance and management systems needed to minimize risks associated with deepwater offshore oil and gas development worldwide.”

The 1-page letter (with 10 pages of questions and signatures) goes on — urging all companies, including Apache, involved in subsea deepwater drilling to be open and transparent with investors and stakeholders regarding the programs they have in place for managing risks. The questions submitted inquire into the amount of money spent on R&D with respect to safer offshore drilling technologies, contingency plans, lessons learned from BP Macondo and the well blowout, contractor selection and oversight and governance and management systems.

With pressure like this, it is hoped that the Exxon’s and BP’s of the world will be forced to answer tough questions regarding managing the extreme risk they encounter. Like every other public company, they must answer to the owners — the shareholders. Let’s hope they do . . . and do so truthfully.

Learning Through Destruction at FM Global

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FMglobal

FM Global’s Research Campus is one of the more interesting things about the insurance industry. Basically, what the company did was build a giant, airplane-hanger-sized warehouse so it would have a place to blow things up. It’s not all fun and pyromania, however. The real value comes from what FM Global observes.

By testing the destructive potential of certain disaster scenarios, the company is able to better understand how building materials, walls, windows, roofs, houses, warehouses and even entire industrial facilities can be fortified to withstand the worst.

It’s all about loss control, really.

For example, the company might do an experiment to find out how much wind it takes to compromise the structural integrity of the Model ABC Roof Flashing sold by XYZ Company if it is installed with 12 half-inch nails. If the wind exposure (both in MPH and duration) that sends the flashing flying is a realistic figure to expect in a certain location (say, Florida) then you now know that it is not the best building material to use if you’re building a tiki restaurant in South Beach. On the other hand, if the flashing does withstand 160 mph winds for 30 minutes, the company now knows it won’t fail in anything but the most catastrophic storm.

Such knowledge is great for the industry at large — it helps all stakeholders learn how building materials hold up in disasters. And the proprietary results are even better for FM Global — they help the company be extremely confident in its underwriting decisions.

Rudd Bosman explains as much in the video below, which complements a new article on the campus that Fortune published in its latest issue. “We spent well over $100 million in capital expense on this facility. It’s absolutely worth it. It’s where we learn what we need to do to prevent losses from happening. That knowledge is invaluable.”

A few years ago, our Editor in Chief Morgan O’Rourke got the chance to tour FM Global’s Research Campus on a day where some serious explosions were taking place.

Outside, it was a quiet, clear January day in the woods of western Rhode Island. But hidden just off the road, in a relatively nondescript structure, I stood in awe some 100 feet away from the largest fire that I had ever seen. A fuel leak had caused a blaze nearly three stories high with flames so intense that the facility’s emergency sprinkler systems were actually making it worse. When the water came in contact with the burning fuel, it caused a reaction much like what happens when water is splashed on a grease fire in the kitchen. Huge fireballs erupted, threatening to engulf the ceiling and the sensitive machinery located there. Even from my distant vantage point, it was very hot and very impressive. It was also a simulation. Welcome to just another day at the office for the scientists and engineers at the FM Global Research Campus.

Check out the rest of Morgan’s feature for more on the most destructive place in insurance.

You can also find more about the campus on FM Global’s website.