Hurricane season: Beware a false sense of security
Ed McNamara, CEO, Armada Risk Partners, port insurance broker
The hurricane season is here.
While forecasters are predicting that storm activity in the Atlantic basin will be ‘below normal’ in 2026, safety experts are warning against that triggering any false sense of security.
Even ‘quiet’ hurricane seasons can produce catastrophic storms, as has been shown in the past. And it takes just one hurricane to make it a very bad year for those in its path.
NOAA’s National Weather Service is predicting a 55% chance of a below-normal season, with 3-6 hurricanes, including between 1-3 major ones, delivering winds of 111mph or higher.
Caribbean, Gulf Coast, and Eastern seaboard ports are on the frontline when it comes to risk, and comprehensive marine insurance coverage remains critical to ensure they are not exposed to massive disruption from severe damage or prolonged blockage.
It is vital they have proper insurance in place, so that they can take immediate action and restore operations as quickly as possible.
Hurricane insurance for port operators requires specialized policies that cover large-scale physical infrastructure, third-party liability, and supply chain disruptions.
It is imperative that operators regularly – and rigorously – check their insurance coverage, to make sure they are adequately protected and have control of their recovery operation.
‘Be prepared’
Being able to take that control is important. Relying on government to unblock your port when it has no spare capacity to help is a dangerous strategy, as was witnessed two years ago when several hurricanes hit the Gulf Coast, Florida and Texan ports in quick succession.
The message, as always, is ‘be prepared’. And as part of that preparation operators, particularly port authorities and shipping companies, should proactively review their insurance coverage to ensure that it is fit for purpose.
Here are some key areas to consider:
- Business Interruption Coverage: Ensure your policies adequately cover both revenue losses from port closures or operational disruptions and the cost of restoring operations as quickly as possible
- Liability Coverage: Make sure that liability limits are sufficient to cover potential third-party claims for injury or property damage as a result of hurricane-related incidents
- Supply Chain Disruption Clauses: Shipping lines should examine their policies for clauses addressing disruptions to the wider supply chain caused by extreme weather
- Named Windstorm Deductibles: Understand the specific deductibles that apply to hurricane-related damage:
- Property Valuation and Asset Reviews: Ensure that all port facilities, equipment, and infrastructure are regularly appraised and accurately valued, so that insured values reflect current replacement costs and help avoid underinsurance in the event of a hurricane loss
Port blockage insurance
Port Blockage Insurance is another area where keen attention is required. In an extreme weather event, a port can quickly become blocked – rapidly exposing operations, assets and people to severe disruption, damage, and third-party claims.
Port Blockage Insurance is a strategic imperative, providing financial protection in the event of closures or blockages, ensuring ports can mitigate losses, expedite recovery efforts, and swiftly resume operations.
Being prepared also includes making sure risk procedures align with the U.S. Coast Guard Port Conditions, which mandate specific procedures for hazardous materials, container stacking, and vessel movement as a storm approaches.
Hurricane seasons can vary when it comes to the scale of storm activity. But one thing remains constant. By fostering a culture of risk awareness and proactive risk management, port operators can reduce the likelihood and severity of future disruptions. Now is the time to invest in resilience and preparedness.
For further advice on protecting your port contact Ed and the Armada team: