Alongside the promise of annual leave and great escapes, Australia’s long hot summer marks the height of natural disaster season – a notoriously stressful time for many business owners across the country. While the potential wrath of Mother Nature can leave us feeling powerless at times, significant steps can be taken by business leaders to mitigate the potential impacts to their operations, bottom line, and indeed livelihoods, in the event of a disaster. In the following piece, we’ll explore the two fundamentals for natural disaster risk-minimisation:

    1. Physical risk protection through mitigation
    2. Ensuring a comprehensive, truly ‘catastrophe-fit’ insurance program is in place.



Businesses can take the following preventative steps to ensure their physical assets are protected as much as possible in the face of disaster:



    • Ensure all buildings, plant and equipment (including surroundings) are adequately insured for their replacement* value
    • Keep sites clean, with flammable materials stored off-site
    • Where possible, construct premises from fire-resistant materials
    • Assess business interruption exposures to key customers and suppliers in the event of bushfire.



    • Have a cyclone emergency plan in place and familiarise your entire staff with the plan
    • Regularly monitor weather and associated alerts
    • Back up all electronic files
    • Secure all stock and equipment indoors if currently outdoors
    • Have a business continuity plan in place.



    • Ensure your building(s) and surrounding properties are in a good state of repair
    • If possible, have alternative (backup) power sources available such as generators
    • If situated in a flood prone area, ensure stock / raw materials are stored at height
    • Secure all loose items indoors
    • Source an adequate number of sandbags (if more permanent flood barriers are not an option) for use in the case of emergency.

To discover more about protecting your home and personal assets from extreme weather, be sure to read Protecting Your Assets: Lessons From an Unprecedented Summer of Weather.




In the event disaster strikes, having a robust, ‘catastrophe-fit’ insurance program in place is critical to ensuring business continuity interruptions and implications are minimised. Strong insurance programs will cover off the following four pillars:



It is recommended that clients look to conduct a detailed risk survey of their key operating or business critical sites.  These are typically completed either by a qualified risk engineer who will identify and qualify certain vulnerabilities that may exist within a business, as well assessing:

    • The likelihood of these hazards causing a loss
    • The severity of a loss incurred by such hazards
    • The effectiveness of existing controls within the business to mitigate these hazards.


In some cases, existing controls do not completely mitigate identified losses, meaning additional levels of protection are needed. For instance:

    • Improved fire protection
    • Hot / cold working permits
    • Smoke/fire detection
    • Housekeeping
    • Introduction of business continuity plans.


Risk surveys will typically cover off:

    • Hazards (natural, man-made or operational)
    • Construction materials used
    • Surrounding exposures
    • Production ‘bottlenecks’
    • Existing levels of risk management.

Additionally, a risk survey will set out a number of recommendations (to mitigate risks) in an implementation plan.



According to the Insurance Council of Australia, many properties destroyed in the summer bushfires earlier this year were underinsured, meaning they had cover but inadequate levels to replace or rebuild what was lost. Having accurate and current valuations of your buildings, plant, equipment, and stock will help businesses to ensure they’re adequately covered for their repair and / or replacement in the event of a loss. 

*Being underinsured can bring about financial hardship and a shortfall in cash flow. Thus, understanding the costs to replace all critical items of your business versus the original written or purchase value is imperative. Any capital expenditures (CAPEX) should also be taken into account when considering replacement costs of business assets.



Similar to a valuation of the business’ physical assets, a Business Interruption (BI) review focuses on the financial impact (profit or revenue) of the business and its ability to return to a pre-loss position following an event. Regardless of whether a business is affected directly, indirect losses can arise as a consequence of large-scale catastrophes, therefore understanding what exposures exist is vital. A BI review will assess factors such as:

    • Adequacy of current indemnity periods and whether they align to plant rebuild timeframes
    • Alternative location(s) to conduct business or source raw materials
    • Scenario-test existing scope and levels of cover
    • Exposure to key customers and suppliers
    • Ensure base cover adequately protects the business.



As businesses grow and expand, so too does their direct and indirect footprint. An in-depth insurance program review by your broker will help ensure all required policies are in place, and adequate for the protection of the business. This analysis will also uncover any uninsured risks or perils that may be excluded or limits/sub-limits that require adjustment.  This review should be completed in conjunction with the output from risk assessments, valuations and business continuity plans.




Despite having minimised all physical risks, damage incurred by natural catastrophe is unavoidable. In the immediate aftermath of a bushfire, cyclone, storm or flooding, business owners should call their broker ASAP, and take the following steps:

    • Arrange for a contractor to undertake an ‘emergency make-safe’. This involves temporary repairs to ensure the property is watertight and to minimise/prevent further damage. If you’re unsure who to call, try the SES for emergency assistance.
    • If water has entered the property, do not switch on the electricity until an electrician has undertaken checks.
    • Avoid black water – this is unsafe, contaminated water and must be left to experts.
    • Dry out wet areas – contact a restoration expert to extract water and commence the drying process (i.e. removal of wet carpets and installation of blowers, dehumidifiers).
    • Prepare an itemised list of damage and take photographs to support your claims process.
    • Dispose of spoilt and destroyed items. Again, it’s important to take photographs.
    • Keep any items that can be repaired. If in doubt, speak to your broker.
    • Obtain quotes to repair damaged items, which will help in the claims process too.



To learn how Honan can support you in protecting your business, people and operations ahead of a potential natural disaster, please reach out at any time.


Travis Wendt
Head of Corporate Insurance & Risk Solutions

+61 434 651 918


Additional content provided by Jesamine Shaw and Claudia Pengley.



Learn more about protecting your assets from extreme weather with this guide.



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