The peril of a $70 billion loss to a $300 billion industry has made insurers wary. That, exacerbated by an only slightly hardening market following a decade of dropping rates and premiums, has created a capacity (ability to renew existing property value limits) problem not seen since the mid-1980’s. At that time in the mid-1980’s, courts were “rewriting” insurance policies to create pollution protection for municipalities where none existed per the policy exclusions.

Today we have the national threat of catastrophic losses due to terrorism. Not since the War of 1812 has the continental United States been attacked within our own borders. Rates and premiums have been actuarially set based upon natural disasters, never the threat of deliberate destruction. But enough of historical perspective.

What do we do?

This is the time to check and review:

• Your plant’s disaster recovery plan. Review it. Practice a simulated shutdown.

• The creation of a “virtual” back office, making you less site-sensitive in the event of disaster. Be sure that computer records are backed up, stored off site, and available for reloading at any temporary location.

• Communication lines restoration or replacement capability at several temporary sites.

• All contracts for transfer of risk or your assumption of risk.

• Force majeur clause review in all contracts to prevent risk assumption during times of catastrophic events.

• Overseas facilities, employees, and travel plans to assess risk and costs of travel to your personnel and business survival.

• and don’t forget that you still have cyberspace liability:

• Privacy issues with Internet transactions

• Customer expectations with respect to security of data

• Customer expectations with respect to security of data

• Global intellectual property exposures regarding your web site

We have been abruptly reminded of the need for careful risk management. Don’t leave it for another time.