Severe Weather and the Interconnectivity of Risks:

How Businesses Can Manage Through the Storm

• Liberty Mutual is a global insurance carrier that provides commercial and specialty insurance, surety, and reinsurance solutions.

• Liberty Mutual’s Global Risk Solutions (GRS) business division consists of GRS North America, Liberty Specialty Markets, and Global Surety, and includes specialty brands Ironshore Insurance Services and Liberty Global Transaction Solutions, as well as Helmsman Management Services. As a leading insurer and surety provider, we know the true reason for our success lies with our people. Our global team of professionals shows up every day, in 125 offices across the US – and 50 more locations abroad – with their sharpest insights, their most innovative ideas, and their wholehearted commitment to brokers and customers.

• In business since 1912, and headquartered in Boston, Liberty Mutual is the sixth largest global P&C insurer based on 2020 gross written premium and ranks 71st on the Fortune 100 list based on 2020 revenue. As of December 31, 2020, we had $43.8 billion in annual consolidated revenue.

• For more information, please visit us at http://www.business.libertymutual.com.

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PRESENTERS

Autumn DembergerContent StrategistRisk & Insurance®

Moderator:

Taylor Archambault VP & Manager, U.S. Property and Marine Claims | Liberty Mutual

Meg SuttonSVP and Manager, U.S. Casualty Claims | Liberty Mutual

Toby SmithPresident, Environmental and Casualty| Ironshore

Matt SteinVice President of Business Development | Jupiter Intelligence

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Property overview:Business disruption after a severe weather event

• Traditional property risks and claims that need to be addressed before, during, and after a severe weather event.

• Supply chain and material shortages that can delay businesses from reopening

• The talent gap and shortage within the trades

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Casualty overview:Municipal, infrastructure, and other casualty risks

• Leadership due diligence for adequate severe weather preparations • Keeping the public safe before, during, and after a severe weather event

and recovery • The downside of resourcefulness – product liability claims

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Environmental overview: Cleaning up the community

• Bacteria and mold thrive in wet environments created by floods and power outages, boosting risk for contamination

• Severe weather can cause significant damage to storage tanks, which can impact the surrounding areas.

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Climate change resiliency: What to look for when looking ahead

• As climate change and severe weather continue increase in frequency and severity, looking at downstream/domino effects.

• How using raw data and ‘downscaling’ can help businesses take a holistic view of operations

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Interconnected Risk #1: The Immediate Property Impact

Interconnected Risk #1: The Immediate Property ImpactTraditional property risks

• Property damage. Addressing damage to your building or inventory due to the result of a storm.

• Equipment breakdown. Weather events can damage critical equipment needed to operate (servers, electrical systems, etc.).

• Theft and vandalism. Locations that may be vacant during repairs could be susceptible to vandalism and theft.

• Supply chain disruption. Ensure that inventory, raw materials, and other critical supplies are available so business operations can continue.

• Business interruption and continuity plans. Making sure that your business has business continuity plans in place to help protect employees and restore business operations safely and efficiently.

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Interconnected Risk #1: The Immediate Property ImpactRebuilding delays

Material shortages: There is a shortage of materials due to the pandemic and rise in residential construction projects. During a severe weather event, this shortage becomes even more apparent.To expediate repairs, contractors may use more readily available subpar materials that could lead to long-term issues down the road. Labor shortage: The increased shortage of skilled labor in the trades can delay repairs, particularly in situations where much of the region’s infrastructure is damaged.Bringing in unskilled or inexperienced workers to help fill the trade talent demand can lead to:• Increase in worksite injuries and workers compensation claims• Subpar work that can leave contractors exposed to construction defect claims

These issues can lead to repair delays that can ultimately lead to longer business interruption as well as long term construction defect claims.

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Interconnected Risk #2: Infrastructure, Safety, and More

Interconnected Risk #2: Infrastructure, Safety, and MoreLeadership due diligence

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Severe weather events often push systems to their limit. If those systems fail, businesses and municipalities may be liable for claims relating to property damage and business interruption. Especially if the probability of those severe weather events is knowable through advanced modeling.

• Most recent example – the historic Texas winter storms that left much of the state without heat or power, endangering the public.

• Leadership can be held liable for not preparing to provide essential services during a severe weather event

Some other infrastructure risks to consider as a result of severe weather: • Electric substation failures as a result of flooding, causing blackouts • California fires that are sparked by downed power lines.• Fires and spills at chemical plants from flooding such as what we saw during

Hurricane Harvey• Shutdown of medical facilities due to flooding such as what we saw during

Superstorm Sandy

Interconnected Risk #2: Infrastructure, Safety, and MoreProduct liability risks

• Severe weather can leave people without heat, electricity, water, and other essential needs

• Many people and businesses may use products outside of their intended use until resources are restored.

• Widespread use of generators, water filtration systems, and space heaters may expose manufacturers to increased claims in the event of equipment failure, property damage, or injuries.

• Due to material shortages, subpar materials such as Chinese drywall can also lead to construction defect claims.

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Interconnected Risk #2: Infrastructure, Safety, and MoreMunicipal and public safety issues

• Public health and business operations are at risk when water, power, transport, and telecom systems are damaged or destroyed.

• Keeping the public safe, particularly in large masses, can be logistically difficult for state and local municipalities and lead to a rise in general liability claims

• Finding adequate shelter and other essential services can lead to an increase in other safety risks, such as overcrowding in hotels.

• Unsafe conditions can also increase potential for theft, assault, etc.

Throughout the country we have seen the rise of a Chief Resiliency Officer to help businesses and municipalities address new risks that are arising because of severe weather. (e.g. higher temperatures, increase in flooding, etc.)

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Interconnected Risk #3: The Environmental Look

Interconnected Risk #3: The Environmental LookLetting mold take hold

• Heavy rains and floods can cause extensive damage to buildings.• If damage is not addressed quickly via repairs and drying out impacted

areas, this can lead to environmental risks.• Bacteria and mold thrive in wet environments - boosting risk for

contamination and adding to removal costs.

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Interconnected Risk #3: The Environmental LookRush to reopen

• Businesses that rush to reopen or restart operations, particularly after a severe weather incident, may not take the proper steps to dry out an area to mitigate the risk of mold and bacteria growth.

• For example, hospitals that are working quickly to get patients back through their doors or hotels that want to welcome guests back.

• Contractors with projects that were exposed to severe weather but looking to get back on schedule may not fully address these risks.

• There could also be a gap in coverage for businesses as it pertains to mold related losses.

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Interconnected Risk #3: The Environmental LookCasualty concerns

Employee and public safety:Mold exposure can pose significant risks for employees and the public, which can lead to an increase in workers compensation and/or liability claims.

Construction default:Not properly drying out and preparing a construction project can compromise the structure and lead to future construction defect claims

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Interconnected Risk #3: The Environmental LookStorage tank concerns

Lightning strikes, deep freezes, flooding, and other weather events can cause damage to storage tanks.• This damage can result in a release of produced water and other

pollutants into the local the environment or water supply.• Businesses could be liable for environmental cleanup claims in addition

to tank repair or replacement costs.

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What’s Next: Climate Change Resiliency

Looking forward

Extreme weather is now a constant part of the business landscape.While companies don’t have the power to singlehandedly eradicate climate change, they can take a big-picture look at how severe weather likely will affect their risk in years to come.

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Leveraging data to support climate resiliency

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Businesses should consider the downstream effects of climate change and how the landscape may affect operations.

Businesses need to look at part investment and part operations:• Investment: understand physical climate risks across their portfolio of physical

assets (owned, leased, supply chain) and invest in resilience at locations of highest exposure/ vulnerability

• Operations: update business continuity plan based on new extreme scenarios based on new data

Aggregate data can play a critical role in helping make long-term strategic decisions• Data on how extreme events (e.g., hurricanes) and how chronic perils (days of

extreme heat) are changing• Strategic decisions should be evaluated on both a global scale (to view entire

portfolio), but also at local scale to understand risk at specific assets• Decisions should factor in the latest advances in climate science, which is a dynamic

field of research• Climate peril data can help you evaluate damage and the potential economic impact

Key Takeaways

KEY TAKEAWAYS – Property

• Property claims are an obvious risk during an extreme weather event, but they may be more complex than anticipated.

• Companies should prepare by establishing a business continuity plan that incorporates possible supply and labor shortages, as well as the likelihood of further business interruption as the area rebuilds.

• From a claims perspective, it’s important for companies to establish relationships with restoration experts in advance and to understand what resources are available through their insurance carrier.

• Understanding how your carrier is using 3rd party data in CAT deployment to know where resources are needed and what areas are the most impacted and need the most support.

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KEY TAKEAWAYS – Casualty

• It’s vital for businesses and government leaders to have a business continuity plan in place for severe weather events and demonstrate due diligence in the face of ever-increasing risk.

• Leaders should collaborate with their insurance provider to address the different facets of the complex casualty landscape.

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KEY TAKEAWAYS – Environmental

• Before a storm, businesses should ensure their infrastructure will protect the environment from pollutants or hazardous waste.

• If a weather event does occur, companies shouldn’t rush to reopen. Instead, they should follow safety protocols and work with their insurance carrier to address any potential issues to mitigate the risk of environmental claims.

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KEY TAKEAWAYS – Using data to look ahead

• Every business and asset is vulnerable to climate risks in unique ways • Working with the right insurance / data partner, businesses can

leverage climate risk analytics to better understand climate exposure and the potential economic impact.

• Using that data, you can make informed decisions that can help mitigate risk to your business, understand your operation’s impact on the climate, and how to be prepared for predicted weather patterns and changes.

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• Liberty Mutual is a global insurance carrier that provides commercial and specialty insurance, surety, and reinsurance solutions.

• Liberty Mutual’s Global Risk Solutions (GRS) business division consists of GRS North America, Liberty Specialty Markets, and Global Surety, and includes specialty brands Ironshore Insurance Services and Liberty Global Transaction Solutions, as well as Helmsman Management Services. As a leading insurer and surety provider, we know the true reason for our success lies with our people. Our global team of professionals shows up every day, in 125 offices across the US – and 50 more locations abroad – with their sharpest insights, their most innovative ideas, and their wholehearted commitment to brokers and customers.

• In business since 1912, and headquartered in Boston, Liberty Mutual is the sixth largest global P&C insurer based on 2020 gross written premium and ranks 71st on the Fortune 100 list based on 2020 revenue. As of December 31, 2020, we had $43.8 billion in annual consolidated revenue.

• For more information, please visit us at http://www.business.libertymutual.com.

SPONSOR: LIBERTY MUTUAL INSURANCE

Sponsor: