Navigating the Risks of Owning a Business in Hurricane Country

For high-net-worth and ultra-high-net-worth entrepreneurs, expanding into the Southeast can create significant opportunities, but it can also introduce risks that extend well beyond the balance sheet of a single business. For business owners operating in Alabama, Florida, Georgia, the Carolinas, or other hurricane-prone areas, property damage, business interruption, insurance coverage questions, and other consequences of a major storm can affect both the company and the wealth of its owner.

That makes business risk management an important consideration when incorporating a new business interest or property into a broader wealth plan. A wealth advisor with experience in business risk management may help identify potential exposures, evaluate how a significant loss could affect the owner’s overall financial position, and coordinate with other professionals when a major claim occurs.

Hurricane risk can extend beyond the business itself

A hurricane can create an obvious threat to commercial real estate, equipment, inventory, and physical operations. But for an entrepreneur with substantial personal wealth tied to a business, the financial effects can extend much further.

Consider a business owner who may have:

• Significant personal wealth concentrated in one operating company
• Commercial real estate held personally or through a related entity
• Multiple properties or business locations across hurricane-prone states
• Personal guarantees tied to business debt
• Substantial cash-flow requirements during a business interruption
• Employees, vendors, customers, or suppliers affected by a major storm
• Plans to acquire additional businesses or real estate in the Southeast

A major loss at one property can therefore become a broader wealth-management issue.

The Atlantic hurricane season officially runs from June 1 through November 30, and NOAA’s historical data shows that hurricane exposure is a recurring consideration for states along the Gulf and Atlantic coasts.

Entrepreneurs considering expansion may need to consider more than whether their property is appropriately insured, but how a catastrophic event could affect the interconnected pieces of their financial life.

Risk management in wealth management

Risk management is one component of a comprehensive wealth strategy and can complement financial, tax, estate, and succession planning, as well as other areas of a business owner’s financial picture.

The goal with risk management is not to eliminate every risk, but to help the business owner understand where significant exposures exist and how those exposures fit into the larger financial picture.

This can be particularly important for entrepreneurs whose wealth has grown alongside their businesses. A business may be an important source of income, a major asset, and the foundation of a family’s long-term wealth strategy at the same time.

Insurance deserves attention before a storm

For business owners entering hurricane country, commercial hurricane insurance should be evaluated before a loss occurs — not after.

Commercial property policies can contain detailed provisions governing covered property, deductibles, exclusions, limits, valuation methods, business interruption, and other aspects of a claim. Flood-related losses can involve additional considerations, and coverage depends on the applicable policy and circumstances.

A wealth advisor is not a substitute for an insurance professional or attorney; however, a wealth management team with risk management experience may offer to help a client identify questions to raise with those professionals and consider how insurance decisions fit within the client’s broader financial plan.

For example, a client may want to discuss:

• Property values and whether coverage limits reflect current circumstances
• Hurricane, wind, flood, and other applicable deductibles
• Business interruption and related coverage
• Replacement-cost and valuation considerations
• Coverage for equipment, inventory, or other critical assets
• The financial effect of a prolonged interruption
• How multiple properties or entities are covered
• Liquidity available to fund expenses while a claim is being evaluated

These questions can become especially important when an entrepreneur is acquiring a new property or entering a new state.

What is considered a catastrophic loss in commercial real estate?

The value of risk management can become particularly apparent after a major loss from a sudden natural disaster like an earthquake, tornado, or hurricane, otherwise known as a catastrophic loss.

Following a hurricane or other catastrophic event, a business owner may be dealing simultaneously with property damage, operational disruption, employees, lenders, vendors, customers, insurance adjusters, contractors, and other parties.

At the same time, the owner’s personal financial plan does not necessarily stop. Investment decisions, tax considerations, family obligations, debt service, and long-term goals may all continue.

The insurance claim itself can also involve significant documentation and analysis. The National Association of Insurance Commissioners recommends that policyholders maintain records of damage, communicate with insurers and adjusters, understand applicable deadlines and deductibles, and retain relevant documentation.

What documentation is required for hurricane claims? Typically, business owners should be able to present documented evidence of both the property damage and its financial impact, as well as documentation regarding any mitigation or emergency response efforts. A wealth advisor may be able to serve as one part of the team helping the business owner navigate this period.

How a wealth advisor may help navigate a hurricane claim

A wealth advisor does not determine whether an insurance claim is covered, and insurance coverage disputes may require the involvement of an insurance professional or attorney. But a top-rated wealth management firm with relevant experience may help coordinate the financial side of the process by:

• Reviewing the broader financial impact
• Organizing financial information and questions for discussion with insurance professionals
• Considering the potential financial implications of claim determinations
• Coordinating with other professional advisors
• Considering relevant tax implications in coordination with qualified tax professionals

Learn more about how Avidian helped a client navigate a catastrophic loss.

Plan for the possibilities, not just the opportunities

For an entrepreneur evaluating a new business acquisition, commercial property, or expansion into hurricane country, hurricane exposure may be one of many risks worth incorporating into the financial planning process.

That does not necessarily mean avoiding a particular market or investment. Instead, it means considering how the potential opportunity fits alongside the owner’s existing assets, liabilities, liquidity needs, insurance structure, business interests, and long-term objectives.

Avidian is a wealth management firm with business risk-management experience that may offer a broader perspective to entrepreneurs by evaluating those connections before a loss occurs — and by helping coordinate the financial response when an unexpected event does occur.

Schedule a conversation with a member of our Southeast Region team to learn more.

Important disclosure: This article is for informational purposes only and is not intended to provide legal, tax, insurance, or investment advice. Avidian may offer risk-management guidance and coordination as part of its wealth-management services, depending on the client’s circumstances and engagement. Insurance coverage, claims, and financial outcomes vary based on individual facts, policy terms, and other circumstances. Clients should consult qualified insurance, legal, and tax professionals regarding their specific situations. Past client experiences and case studies are illustrative and are not indicative of future results; no outcome is guaranteed.

More helpful articles by Avidian Wealth Solutions:

• Signs Your Wealth Needs a Multidisciplinary Wealth Advisory Team
• What is Asset Allocation and How Do I Integrate it into My Financial Plan?
• Income Protection Strategies for High-Earners in Houston
• Investment Committee Best Practices for Defined Contribution Plans
• How Serving as a Board Observer Can Prepare Heirs for Succession

Reviewed By:

Shaheen Ladhani

Managing Partner

Avidian's wealth planning articles are reviewed for accuracy and alignment with current industry standards by Shaheen Ladhani, Head of Avidian's Endowment and Foundation practice, who brings over a decade of experience managing portfolios for private clients, endowments, and foundations.

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