Assessment of multi-hazard risk transfer strategy for retail distribution portfolio in British Columbia
Critical facilities located in natural hazard prone areas are not only exposed to physical asset damage, but more importantly, can suffer business disruptions that cause losses in revenue equal to or exceeding that of the direct property damage. This applies to many industrial facilities located in Delta, British Columbia that function as warehouses and distribution centres for large retail businesses due to their location value of being close to the shipping route. While business interruption insurance is a popular risk management tool, owners who lack understanding of their business exposure to natural hazards and policy details can still suffer significant unanticipated losses.
The identification of policy protection gaps for business interruption insurance requires a full understanding of the hazard, the assets and business operations, as well as the coverage provided. Kinetica Risk assessed the risk of fluvial and pluvial floods, as well as earthquakes for a retail portfolio of distribution centre and warehouses located within 2 blocks of each other close to the Fraser River in Delta, BC. Our team conducted high-resolution vulnerability assessment for both inundation and shaking damage for each of the buildings in the portfolio. A digital model of the entire distribution portfolio was then subjected to multiple stochastic catalogues of floods and earthquakes to assess the property damage, and operational disruptions to the facility caused by the loss of building services, power and roads connecting the buildings to the local arteries. Individual events of flood and earthquakes were identified as key scenarios that contribute to the total risk both in terms of property damage, and in terms of indirect operational interruptions caused by the loss of power and transportation infrastructure in the vicinity. The risk analytics resulting from this multi-hazard assessment provides a strong basis to the retailer for identifying and negotiating risk transfer solutions, as well as the identification of realistic scenarios for other means of risk mitigation, such as adding redundancy, and asset hardening.
