Thursday, November 6, 2008

CU damages in Hurricane Ike total $10.2 million

MADISON, Wis. (11/6/08)--Damage claims made by credit unions hit by Hurricane Ike in September total more than $10.2 million--the second largest total in the past eight to 10 years, said CUNA Mutual Group.

However, "this pales in comparison to Katrina in 2005" and Hurricane Andrew earlier, said Mike Retelle, claims manager with CUNA Mutual's property and casualty claims. Damages to credit unions in Katrina totaled $22 million.

Ike, which hit Galveston Island, Texas, was different in size and duration, Retelle told News Now. "It covered a larger area and stayed in the area longer. Damages weren't as severe, but we had claims from states as far away as Kentucky and Tennessee."

Ninety-five credit unions made damage claims for 256 locations. Roughly 90% of the claims were from Texas, Retelle said.

Ike's damage to credit unions mostly was from blown off roofs and downed trees. Houston Police FCU sustained the largest damage--$2.2 million in roof damage--and is operating from modular units.

In Ike, damages were more concentrated. "They were enormous and terrible, but focused," he said, while damages stemming from Katrina were due to a failure of the levees. Katrina's damages also included damages from Hurricanes Wilma and Rita.

"Surprisingly, we haven't had a lot of auto damage claims yet," Retelle said. Normally claims for auto damage, both for credit unions' vehicles and repossessed cars trickle in about 30 to 60 days after the disaster hits. "Credit unions concentrate first on getting back up and running."

Credit unions were well prepared for Ike, since the National Credit Union Administration (NCUA) mandates they have a disaster plan. The things credit unions need to do don't change from disaster to disaster. "It all comes down to planning. What will you do if you should have a disaster? Do you have flood insurance or the proper limits? Where will you go?"

However, credit unions do need to update their plans regularly, Retelle said, outlining areas credit unions can focus on during disasters:

Update the logistics in the plan. Say the credit union remodeled its basement recently and the space, which used to be part of a contingency plan, is no longer available. The plan needs to reflect that.

Update claim limits to reflect new expenditures, equipment or data processing. Otherwise, the costs may not be covered in the claim. Credit unions that have consolidated or grown through mergers also need to address this issue.

Spread the responsibility. "We ask credit unions to provide a main contact, but if that person's home is gone or a spouse dies, that person is no longer available. Boards have to take responsibility," said Retelle. "You have to have decision makers."

Keep the future in mind when planning. Do you really want to replace old equipment with the same old equipment, or do you want to update it if you have to replace it?

Retelle said planning can keep at bay these problems, which credit unions sometimes experience:

Keep communications with staff open. "This is the biggest issue. If you don't tell employees what to do, then a secondary disaster can occur." Staff might find other jobs, thinking the credit union is shut down permanently instead of closed for two weeks.

Remember that relationships are key in any industry. The worst time to go looking for contractors for a new building, repairs, data processing or security firm is during a disaster. During a disaster, credit unions may be tempted to treat every repair with the cheapest dollar. Hiring a cut rate plumber to fix a leak might not work if he doesn't know how to operate a sprinkler system, he said.

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