Mark Rowe takes a look at how hurricane disruption is changing the face of the insurance world

Insurers are drawing up plans for specific policies to cover business and other independent travellers whose journeys are disrupted by major natural events, such as hurricanes.

The move has been prompted in part by rising concern over the increase in storms in the Gulf of Mexico, a region frequented by business travellers.

The hurricane season, heralded earlier this month by Hurricane Dean, which blew across the Caribbean and the Yucatan peninsula, has begun. But while media attention focused on tourists scrambling to fly out of the region or hunkering down as the storms gathered pace, insurers are wondering just what an increase in the number, and ferocity, of storms means for them.

At present, backup plans for travellers caught up in natural disasters depend entirely on how you book your trip. Traditionally, tour companies provide support for travellers caught up in storms and are required to provide alternative accommodation, a new destination or offer a refund, but travellers who have booked their trip independently receive no such protection.

Now the underwriters at leading British travel insurers are attempting to thrash out a framework whereby business and other independent travellers can insure themselves against disruption in the event of a hurricane and a range of other scenarios.

“You can have a hurricane blow through an area and afterwards your flight can get in but you find that your hotel has been blown away,” said Steve Muir, a spokesman for AXA, one of Britain’s largest travel insurers. “Now we are looking at whether or not we can offer people cover that would include the effects of storm damage and pay for alternative accommodation. We take it as read that climate change is happening and that we are going to see different weather patterns. That has consequences that will affect insurers.”

Such a premium would be an add-on to a standard policy and, confirmed Mr Muir, the destination would make a difference to the premium. “It can’t come soon enough,” he said. “But we have to look at all the potential scenarios and prices. This is a new area - insurers have always been able to look back at historical data on which to calculate their risk of exposure but now we are trying to gauge what happens in the future.” AXA and other insurers are expected to announce their plans “in the not too distant future”.

Such a move would be timely, because airlines are getting increasingly twitchy about their exposure to risk of weather disruption. In this case, risk does not mean the safety of the aircraft, as all major airlines operate within a huge safety margin when hurricanes develop, relying on national and international advice on whether it is safe to fly. Instead, airlines acknowledge that they may ultimately have to review their backup plans for passengers in the event of disruption. At present, British Airways and other major airlines typically operate a no-quibble company policy that offers passengers an alternative route, a refund or the chance to fly at a later date. But a number of airlines are understood to be exasperated at the increasing cost of regularly putting such a plan into action.

“We’re an airline not a scientific body and in terms of what impact this would have on our operation there are no plans to change our policy at present,” said a spokesman for British Airways. “But we do constantly review this so you can never say no, as everything comes into the equation. It is something we keep an eye on. The policy was applied for Hurricane Dean but you can’t guarantee that it would always be a policy that we would adopt.”

The increasingly cautious attitude of US-based insurers may also have an impact on business travellers looking to rent property or stay in hotels. After Hurricane Katrina in 2005, insurers began to get anxious. What, they wondered, if Katrina wasn’t a one-off, or even a one in a 100-year event? In Florida, major insurance companies, which have traditionally offered property insurance, are increasingly wary of doing so. So if insurers are running scared, who steps in? In Florida’s case, the state has set up a company called Citizens Property Insurance, a government-backed company that guarantees to pay up in the event of storm damage but is taking a risk, as any payouts must come solely from government coffers. This is in contrast to insurers who traditionally have been able to take a loss in one sector because they can reclaim and cover it with profits elsewhere. Florida’s fund amounts to around £1bn: Hurricane Katrina caused around £11bn in damage. It seems that only when the insurers pack up their bags, does the world take climate change seriously.

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