Risk briefing: lessons from Hurricane Otis

Hurricane Otis was an unprecedented event across multiple fronts.

As a Category 5 storm with 165 miles per hour sustained winds, it was the strongest landfalling hurricane on record in both the Acapulco region and Mexico as a whole, aided by a period of record rapid intensification in the 24 hours prior to landfall.

Because the storm intensified so quickly, with wind speeds increasing by 115 mph within 24 hours, the more than one million people living in and around the city had very little time to prepare for the monster storm ahead of landfall.

Only one other storm on record, Hurricane Patricia in 2015, exceeded Otis’ rapid intensification in the Eastern Pacific, with a 120-mph increase in 24 hours.

The NOAA said: ”Reports and images from Acapulco showed catastrophic damage to structures, including many hotels and high-rise buildings, as well as downed trees, severe flooding, and mudslides. Damage was also reported at 120 hospitals and clinics.

”Additionally, more than 10,000 utility poles were destroyed, knocking out power and internet/communications across the region, while numerous transmission lines, electrical substations, and a power plant were also heavily damaged.”

Insured losses from Hurricane Otis are estimated to be between US$2.5 billion and US$4.5 billion, according to Moody’s RMS.

The hurricane caused damage to a large stretch of modern, high-rise exposure along Acapulco Bay, including apartment complexes, hotels, and resorts.vLosses will be largely driven by wind damage with a minor contribution from storm surge and precipitation-induced flooding, the modeller said.

Moody’s says that Aerial imagery and reconnaissance show that Otis caused some of the most incredible wind damage to modern-day high-rise structures ever seen. It adds that observed winds well-exceeded prevalent design wind speeds for the region.

Credits: NOAA NASA CIRA Music: “Dark Mist” by Benson Taylor [PRS]; A Remarkable Idea; Universal Production Music

What can businesses learn from the event

Lack of modelling data and underinsurance are two key lessons from Hurricane Otis.

Julie Serakos, senior vice president, Moody’s RMS, explained: “In determining the overall damage estimates from this event, underinsurance is a common theme. Much of the damaged exposure is unlikely to be insured to the full value of the structure or insured at lower limits, especially in inland regions.”

“We expect most of the insured losses to be driven by damage to coastal commercial and commercial residential exposure. Nevertheless, we expect Otis to be one of the costliest hurricanes in Mexico’s history from both an economic and insured loss perspective.”

Jeff Waters, staff product manager, North Atlantic hurricane models, Moody’s RMS, added: “Observational windspeed data – while limited – suggests a broad swath of exposure and population was affected by major hurricane-level wind gusts.

”Prior to Otis, this region of Mexico had never experienced a Category 5 hurricane landfall, underscoring the importance of using catastrophe models to fill in gaps associated with the historical record, understand the events that haven’t happened yet but could, and the potential impacts on present-day exposure at-risk.”

While several tall buildings survived record gusts, thanks to well-designed structural systems in place for earthquake safety, their lightweight cladding and exterior that improves seismic performance, bore the brunt of high winds and were destroyed.

Rajkiran Vojjala, vice president, model development, Moody’s RMS, commented: ”Recovery and reconstruction efforts could take years. During this time, we expect a high number of total constructive losses given the damage severity and complexity of repairs.”

What businesses should do after a hurricane

Recovery

• Cordon off areas where power lines are down to prevent injuries. Coordinate repairs with the local utility. Prioritize power restoration for critical locations/operations.
• Check for leaking natural gas, propane gas, or gasoline from storage tanks or vehicles.
• Identify and control potential ignition sources if flammable liquids or combustible gases are present.
• Work with salvage crews to prioritize items that require immediate attention above those less susceptible to damage if left for a day or two. Quickly remove standing water and debris, clean and dry vital equipment, and dehumidify damp areas.
• Check and replenish hurricane protection supplies.
• Isolate damaged areas and evaluate, prioritize and expedite necessary structural repairs to minimize business interruption exposure. Provide temporary covers for windows, wall openings and roofs that have been damaged. “Laydown” areas, for the accumulation of combustible debris, should be designated away from any significant buildings or structures.
• Return fire protection systems (water supplies, suppression systems, alarm and detection systems, etc.) back into service as quickly as possible.
• Suspend cutting, welding and other hot work operations until fire protection systems are returned to service.

Should a loss occur, remember to document everything

• Take photographs of all damage and areas where your site is impacted.
• Develop a claim timeline with milestones for your team and the insurance adjustment team to manage expectations on both sides of a claim.
• Capture all invoices, contracts, etc., for loss-related work, including detailed descriptions of the temporary and/or permanent repair/replacement work to be performed.
• Ensure that all loss-related incurred costs are classified and categorized in real-time per your “bucket” of insurance coverages and by loss area/component, such as location, individual equipment, structures, and contents.
• Track – with detailed descriptions describing loss related activity – all in-house costs, such as hourly labor time and cost [with fringes] per person, salaried labor time and cost per person, in-house parts/materials consumed, expenses incurred, time sheets, expense reports, etc.