Of all the risks facing business owners in the Middle East and North Africa (MENA), extreme weather has traditionally been low on the list of priorities. However, the devastating power of nature was revealed in April 2024 when flash flooding caused widespread damage to homes and businesses across the UAE. And those floods revealed something else – businesses were unprepared and dangerously underinsured.
The proportion of businesses holding insurance in the UAE is relatively low, and while having insurance can’t stop the weather, those that were covered found themselves in a far better position, much sooner, than their uninsured peers.
They recovered faster because good insurance provides more than financial compensation for physical damage. It can limit the damage the weather can do to a business, help businesses manage the long-term financial aftermath of an event, and get it trading again as soon as possible.
Above and beyond financial protection
If extreme weather – such as flooding, wildfire, or a cyclone – hits a business, insurance will help pay for the cleanup, repairs, replacement of parts and machinery, as well as covering the rebuild costs.
It also compensates for lost revenue while a business can’t operate – known as business interruption insurance – and may also pay for ongoing costs such as salaries, rent, utilities and the cost of relocation, if necessary.
It’s in the insurer’s interest that clients don’t claim, so many of them provide advice and support to help make businesses more resilient, such as advice on flood-proofing, fire safety or how to prepare for and respond to an incoming storm.
There is a growing expectation from insurers that clients engage with risk engineering services and undertaking regular surveys to better understand and mitigate the risks they face. Many strategic insurance brokers offer these services to clients – as part of the policy or for a fee – and increasingly, brokers are also providing this kind of support.
Many decades of use and development in other parts of the world have shown that risk management can significantly reduce the impact weather events have on a business. And for those that can show they have taken concrete measures to make their business more resilient, their chances of securing better coverage from insurers, at a better price, increases.
This level of support often comes at a cost but the cost of not having insurance is exponentially higher. Businesses without insurance have to absorb all the cleanup, repair and replacement costs themselves and are left without any income during recovery and while supply chains return to normal.
Presenting the risk in the best possible light
The risks faced by two businesses in the same region, city or even street, can differ significantly which is why it’s important to pay close attention to the insurance policy, the cover it provides and in what circumstances it will pay out.
In creating a policy for a business, insurers will analyse historic weather patterns, the frequency of weather events and how much damage they have caused in the past while also trying to predict how those weather patterns will change over time. Insurers will consider hundreds and sometimes thousands of different data points in making their underwriting decisions, as well as factoring in any risk mitigation measures the businesses has put in place. Placing a price on risk is a complicated process, but so too is selecting the right insurance provider, which is why many businesses turn to independent, strategic insurance brokers for help.
Insurance brokers are experts in navigating the insurance market to find the right provider and the right cover to protect their client from sudden, unexpected events. Quality brokers will partner with their clients, help them understand the risks, how to mitigate them and present the business in the best possible light to get the best possible cover from the insurance market.
The weather in the MENA region is changing, there’s no doubt about that, and the business community’s attitude towards insurance is evolving in tandem. Nothing can be done to stop extreme weather events happening, but with a supportive broker and a commitment to risk reduction, the impact they have on individual businesses and the wider economy, can be significantly reduced.
