NU Online News Service, July 15, 2:35 p.m. EDT

Putting a crisis plan in place to deal with a catastrophe is notenough--the plan must be tested, revised, and treated as a "livingdocument," according to risk experts.

In a webinar,"Coverage and Continuity in a Crisis: Disaster Preparedness,Mitigation and Management," sponsored by the insurer Zurich,National Underwriter and American Agent &Broker, experts said that when dealing with any disaster, thefirst thing a company needs is a plan, and in a poll taken of thoseattending the conference, more than 50 percent said their companyhas a plan in place.

But more than 60 percent said they have not revised the plan orconducted drills within the past 12 months.

That, said Calvin "Cal" Beyer, vice president and head ofmanufacturing for Zurich North America Commercial, is a mistake. Hesaid one of the essential best practices to dealing with a crisisand its aftermath is to treat the disaster plan "as a livingdocument."

He noted that the more time a company spends planning forrecovery from a disaster the less time it spends in the recoverystage. Effective planning also helps to reduce business disruption,he said.

"It not only allows you to keep the business going, but alsokeeps the customer happy," Mr. Beyer observed.

Viewing disaster statistics, Arnold Mascali, managing principalwith Reliance Services Group and former managing director of Aon'sGlobal Rapid Response practice, said that the number and value ofdisasters has been increasing since the 1980's, and that riskmanagers need to believe that a catastrophe is coming and they needto be ready for it.

Generally, companies that are unprepared suffer two fates from acatastrophe: either they lose income or go out of business, saidMr. Mascali.

While many may believe that their greatest fear of loss couldcome from hurricane, tornado or fire, in fact there are otherevents that are more likely to cause catastrophic loss, he noted.Among the top causes are accidents, production problems and laborunavailability or shortage.

Stressing the need for communication, Mr. Mascali said thatafter a catastrophe, many corporate policyholders may find gaps intheir insurance coverage. A prime reason for this, he said, ismisunderstanding caused by miscommunication between the insured andinsurer.

The areas of misunderstanding are usually in terms andconditions, and value of the risk causing the event to beunderinsured. Risk managers, he said, need to "make certain thatthe value is what it costs to replace the property in yourinsurance plan."

An important aspect of any insurance program to deal with acatastrophe is business interruption insurance, noted Mr. Mascali.He said risk managers need to understand the period ofindemnification.

A business interruption policy only covers the period that itshould take to get a business operational again. He said it doesnot cover the additional time it takes to make additionalrenovations to a property that was not part of the originalstructure.

Risk managers should also have in place extended period ofindemnity coverage that covers from the time a business beginsoperation again until it reaches a previous level of revenuegeneration.

The webinar panel was moderated by John W. DeWitt, principalwith J.W. DeWittt Business Communications and contributing editorfor National Underwriter and Tech Decisions.