A View from the Field

Post-Hurricane Rebuild Risk Management

Hurricane rebuilding will require creative solutions.
By: | October 17, 2017 • 7 min read

Before this year’s severe hurricane season, our country’s construction industry was already facing significant challenges.  A short supply of skilled labor, coupled with a new expedited permit approval process was raising questions about resources, quality and safety control industry-wide.


And then came Harvey, Irma and Maria.

In the immediate aftermath of the storms, attention is appropriately focused on the individuals impacted by residential loss, property damage and devastating loss of life. As the water recedes, the focus moves from immediate survival to moving forward. We will be looking at not only the extreme residential destruction, but also to the commercial and infrastructure damage.

As towns and cities confront the challenges of getting people back to work and businesses up and running, there will be significant risk management factors to consider for the construction, real estate investment, architecture and engineering industries.

Learning From the Sandy Rebuild

In the aftermath of Sandy, the Hurricane Sandy Rebuilding Task Force and the U.S. Department of Housing’s Rebuild by Design competition fostered the development of innovative solutions to regional vulnerabilities. While the resulting approaches were unique to the region, the creative integrations are great models and might serve as inspiration for post-Harvey and Irma building.

Working in 199 Water Street in lower Manhattan, I saw firsthand the need for this inspiration following the wrath of Sandy and the very technical challenges that our building’s developer faced.  Allied World’s New York operations were temporarily displaced after the 35-story building where we are headquartered took on eight million gallons of seawater in its basement. Our developer, Jonathan D. Resnick, very eloquently captured the realities of that moment, saying, “You can’t fight the water. You have to adapt.”   

And adapt he did. Floodgates were installed between the exterior columns of the building, protecting utilities like the heating and cooling systems, and other utilities were relocated, prompting difficult decisions about space allocation. The building is stronger and better prepared for disaster today than before the storm.

As Sandy and Katrina showed us, a thoughtful rebuild is perhaps even more important than a speedy one. A thorough understanding of the issues at play and an informed plan for managing the associated risks will help safeguard companies and developers alike throughout the post-hurricane rebuilds and in the years that follow.

Joe Cellura, president, North American Casualty Division, Allied World

That should be our goal moving ahead — to be stronger after the storm.  To do this, developers, construction companies, architects, engineers and environmental experts must work together to manage the risks they face in the rebuild and to learn from lessons of past disaster rebuilds.

Here are the risk management issues to watch:

Construction Workforce Shortage

Simply finding qualified professionals to get the work done is going to be a challenge. The construction industry is already stretched thin. According to Associated General Contractors of America’s 2017 Workforce Survey, Texas has short supply of concrete workers, electricians, cement masons, carpenters, plumbers and installers. Florida contractors list the workplace shortage as their biggest concern.

Future Proofing Design and Construction

One of the biggest challenges will be for architects and engineers to learn from mistakes in the design phases.  That design endeavor will likely have to involve material zoning and land use regulations that could present quite a hurdle.

A smarter rebuild is imperative as we’ve now seen what went wrong with previous designs in the face of flooding. Should Houston ever flood again, there will be liability risks if buildings are not properly protected. The recently appointed Hurricane Harvey Recovery Czar, John Sharp, has said at his introduction by Texas Greg Abbott, “One of the guiding principles will be to future-proof what is being rebuilt so as to mitigate future risks as much as possible.”

Don Neff, president and CEO of LJP Construction Services and a construction risk management expert spoke about how to do just that: “’Future proofing the reconstruction effort following both Harvey and Irma will require more innovative and higher standards of care. Managing construction risk in anticipation of the next costly natural disaster will logically require not only more robust architectural and engineering solutions but also proactive quality assurance and quality control protocols over the entire delivery cycle. This includes objective third-party peer reviews of creative pre-construction designs; comprehensive tracking of during-construction assemblies to capture the quality before they are covered up; and methodical post-construction building maintenance activities.”

Environmental Exposure

There are a host of potential environmental issues in the aftermath of this hurricane season, and with the EPA short-staffed due to Trump administration firings, it’s not entirely clear if these concerns will have proper oversight.


Houston is a petrochemical hub; the area is home to more than 450 plants, including refineries, as well as many hazardous waste disposal sites and Federal Superfund locations. Leaking chemicals and toxins in the floodwaters create similar environmental challenges to those seen after Katrina, and containment will be an active concern. ExxonMobil had two refineries damaged, and an Arkema plant experienced fires and chemical explosions after flooding knocked its power out. The pollution hazards from these and other local plants will have a notable impact on the area, with the added risk of environmental impacts that may become evident only over time.


Protecting workers from the hazards of rebuilding is a clear concern. New technology, including protective gear and drone operations, can and should be employed to safeguard workers and minimize safety risks. Following any catastrophic event, a major concern is structural damage, which traditionally requires a human to put themselves in an elevated and potentially dangerous situation.

Steven Fargo, CEO at DataWing Global, an unmanned aerial systems (“UAS”) services provider, explained the benefits of using drones to minimize risks, “Drones are perfect for mitigating this risk by quickly providing an aerial viewpoint inspection while keeping both feet on the ground. Drones are not limited to just visual information either. Post Hurricane Harvey and Irma, DataWing also used photogrammetry techniques to enable inspectors with 3D measurement capability. The result was better data delivered without risking human life.”

Public Private Partnerships

When handled properly, P3s can expedite projects, which would surely be helpful given the extensive rebuilding required. But who bears the revenue risk if things go wrong? There is inherent risk in these agreements because they involve transferring risk from the public entity to the private one, meaning the private sector will be financially responsible for any issues that arise. The result may be uneven liability on the part of the private sector and a long-term financial commitment for the private entity. Texas has P3 legislation, albeit inconsistent, and has completed several highway projects under the beneficial structure. State financing strains associated with Harvey recovery have the potential to slow important P3 initiatives in the pipeline. Conversely it will be argued that privately financed and operated P3 projects may be the only path forward to rebuild Houston infrastructure. Will Texas be able to implement P3 projects that reach beyond toll roads?  

Political Climate

Recent legislation from the Trump administration is speeding up the infrastructure approvals process, but with faster permits comes the potential for less quality control. An executive order signed on August 15 revoked regulations that would have required the federal government to take flood risk into account when constructing new infrastructure — and yes, this includes rebuilding after disasters.

Experts believe this means the rebuild will not be as safe or forward thinking as it could otherwise have been. Less regulation does not mean less risk — changes may ease the approvals process, but that may make managing risk harder. Companies will need to go beyond regulations when developing best practices.

Long-Tail Health Concerns

Experts predict a 15-20 year recovery, which means health concerns are likely to plague residents and workers for years to come. Among the top potential toxins are chemicals and heavy metals, mosquitoes and the diseases they carry, mental health, and damage to homes (particularly the lasting impact of mold).

Moving Forward

Just as the rebuild itself will take extensive resources, so will effective risk management. Teamwork between architects/engineers, owners/contractors, risk insurance consultants/brokers, insurance industry risk management teams and insurance underwriters will be essential.


This will be a lengthy process.  Liabilities resulting from the rebuilds might not manifest themselves for a decade or more, so long-term risk transfer protections will be important. Along the way, consideration must be given to a full suite of risk management services, including contract review, drone operations, QA/QC services, work health and site safety reviews.

As Sandy and Katrina showed us, a thoughtful rebuild is perhaps even more important than a speedy one. A thorough understanding of the issues at play and an informed plan for managing the associated risks will help safeguard companies and developers alike throughout the post-hurricane rebuilds and in the years that follow.

Working together to manage risk, we can all be stronger after the storm.

Joe Cellura is President, North American Casualty, at Allied World, responsible for for the production and profitability of Primary Casualty, Excess Casualty, Environmental, Surety, Primary Construction and Programs. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

Your High Net Worth Client Wants to Live in the Danger Zone? Here’s What Your Resiliency Plan Should Look Like.

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.


Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”


Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.


“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]