FM Global Study Reveals Most Large Companies Exposed to Natural Disasters but Many Underprepared : 2008 Natural Disaster Business Risk Study findings uncover potential business oversights

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A new survey of financial executives representing the largest corporations in North America reveals almost all companies are exposed to natural disasters, yet many of those firms are not well-prepared for such catastrophes and are not overly concerned about the potential business impact.

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Such actions can mean the difference between a natural catastrophe being disastrous or being a mere distraction.

The findings of the 2008 Natural Disaster Business Risk Study, commissioned by FM Global, one of the world's largest business property insurers, are based on the responses of 100 financial executives from U.S.- and Canada-based corporations with at least US$1 billion in annual revenue.

While 96 percent of financial executives said their companies have operations exposed to natural catastrophes, such as hurricanes, floods and earthquakes, less than 20 percent indicated that their firms were "very concerned" about such natural disasters negatively affecting their bottom line.

"The findings reveal a surprising and concerning gap between the levels of natural catastrophe exposure among North America's largest companies and their level of preparedness," said Ruud Bosman, executive vice president, FM Global, "especially given that, in the first half of 2008, there were about 400 natural catastrophes worldwide with overall losses expected to top US$50 billion.

"Companies may believe insurance can fully protect them from disaster—even from its intangible consequences. But they may overestimate their level of preparedness and underestimate the extent to which their natural catastrophe exposures put their organization's supply chain at risk."

Preparation Gap Spans Multiple Natural Catastrophes

The study findings indicate a consistent disconnect across three of the most common and costly types of natural disasters: hurricanes, floods and earthquakes.

Hurricanes: While 80 percent of companies have North America operations located in regions exposed to hurricanes, nearly 50 percent reported they are not well-prepared for a hurricane. Nearly 80 percent of financial executives from those companies are not overly concerned that a hurricane/typhoon or tropical cyclone could negatively impact their company's bottom line. Floods: While 90 percent of companies have North America operations located in regions exposed to floods, more than 60 percent indicated they are not well-prepared for a flood. Almost 90 percent of financial executives from those companies are not overly concerned that a flood could negatively impact their company's bottom line. Earthquakes: While more than 80 percent of companies have North America operations located in regions exposed to earthquakes, more than 70 percent revealed they are not well-prepared for an earthquake. Eighty-five percent of financial executives from those companies are not overly concerned that an earthquake could negatively impact their company's bottom line. Bosman added that the overall findings suggest it is prudent for companies to also consider the implications a natural disaster could have on maintaining competitiveness, market share and corporate reputation, should they be caught off guard.

"Companies can't stop hurricanes, floods and earthquakes from happening, but by understanding their business risk and taking preventive actions, FM Global has seen companies reduce their natural catastrophe losses by 85 percent or more, often at minimal cost," said Bosman. "Such actions can mean the difference between a natural catastrophe being disastrous or being a mere distraction."

Methodology

The 2008 Natural Disaster Business Risk Study was commissioned by FM Global (http://www.fmglobal.com) and administered from May 2008 to June 2008 by Opinion Research Corporation (http://www.opinionresearch.com), a research and consulting firm founded in 1938 that helps private- and public-sector organizations worldwide by providing objective, rigorous and fact-based market research.

FM Global is one of the world's largest business property insurers, with clients that include more than one out of every three FORTUNE 1000-size companies in more than 130 countries. For nearly 175 years, clients have worked with FM Global to develop robust property insurance and engineering solutions to protect their business operations from fire, natural disasters and other types of property risk. FM Global is ranked #583 among FORTUNE magazine's largest companies in America and was named "Best Property Insurer in the World" by Euromoney magazine. With US$6.3 billion in policyholder surplus, FM Global is rated A+ (Superior) by A.M. Best and 'AA' (Very Strong) by Fitch Ratings.

Key Findings

Natural Disaster   Companies indicating they have North America operations located in regions exposed to such natural disasters   Companies indicating their operations are not well prepared for such natural disasters   Companies indicating they are not overly concerned about the bottom line impact of such natural disasters   Hurricane/Typhoon/Cyclone   80%   48%   79%   Flood   90%   63%   89%   Earthquake   84%   71%   85%   Source: FM Global (http://www.fmglobal.com)

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Steven Zenofsky
FM Global
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