Natural disasters are a top business concern for U.S. commercial insureds, especially after 2023 brought 28 natural disasters that cost at least $1 billion in damages apiece, according to the National Oceanic and Atmospheric Administration (NOAA). Further, 36% of property stakeholders across the country have suffered damage from natural disasters in the past five years—and that jumps to more than half (59%) of property stakeholders in hurricane-prone states, according to a recent Agency Forward survey from Nationwide.

Unfortunately, current building codes are leaving property owners vulnerable. Nationwide's survey found that 84% of commercial property stakeholders acknowledge that building codes need to be improved to better equip properties to face climate risks. Fifty-three percent of respondents said they'd be willing to spend more to increase their structure's resiliency against weather, with a median investment of $20,000. That jumped to 57% in wildfire-risk states and 66% in hurricane-exposed states.

In fact, 52% of commercial property stakeholders nationally, and 66% in hurricane states, say they are already building or repairing their properties to standards above current code requirements.

However, the insurance industry must advocate for improved building codes that acknowledge the reality of increasing climate risk, says Mark Berven, president and COO of Nationwide's property & casualty organization. And property owners agree. Nearly all—97%—of the Nationwide survey respondents said enhancing building standards would better help protect their properties.

“Businesses really believe that having stronger building standards is vital and they're willing to pay for that protection," Berven says. “Sometimes, that's a dynamic that agents are concerned about, but the survey gets directly to the point: folks know that weather and climate change is a real risk that could interrupt their business; it's a concern they're willing to invest in, and they want to know what else they can do."

Building codes are usually designed at the local level by states and local municipalities, but “it's important to collectively talk about the building code dynamic and what we can do as carriers, trade groups and local agents to work with those in charge of codifying or enforcing building standards," Berven says.

The Insurance Institute for Business & Home Safety (IBHS), of which Nationwide is a founding member, is a nonprofit research organization that closes gaps in building science to strengthen the nation's resilience against the growing threat of severe weather and wildfire. IBHS research flows into achievable, affordable and effective solutions to guide building practices, retrofits and mitigation programs for residential and commercial properties.

IBHS's FORTIFIED Home™ and FORTIFIED Commercial™ standards are voluntary construction and re-roofing standards that offer superior resiliency to high wind events. Nineteen FORTIFIED Commercial properties were put to the test in 2020 when Hurricane Sally hit the Alabama coast, and all 19 performed well, which allowed their occupants to recover quickly in the aftermath. The overall damage equated to less than .05% of the total building cost.

“The recovery after a natural disaster costs on average between $20,000 and $50,000, which impacts insurance costs—but maybe more impactful is the amount of time the recovery took, which was four to six months," Berven says, citing the Nationwide survey. “That's significant downtime."

As clients struggle with natural disasters, “agents should definitely make sure they have the right coverage in place if an event should occur, such as business interruption, scheduling the insured properties at the right value, all those immediate concerns. But what do you do to make sure this is a better risk moving forward?" he says. “That's at the forefront of every customer's mind."

“Business owners are all well aware of the fact that severe weather events are a significant risk to their business," Berven adds. “You're really resonating with a client as an agent when you bring forth a conversation about preventative measures that a business owner can take in order to reduce loss."

AnneMarie McPherson Spears is IA news editor.