Be Proactive: Strategies to Best Manage CAT Risk



June 2, 2021 | Allied Solutions  

When it comes to the unexpected, it’s hard to feel proactive. Natural disasters are overwhelming, unexpected, and can change quickly. Service delays can be compounded as business operations stall, mail is delayed, and populations are evacuated. If unprepared, lenders face reputational risk at being unaccommodating or unresponsive in the face of an event, while also facing large collateral losses. 

It’s hard to preemptively measure or anticipate collateral risk exposure due to severe weather or catastrophic events. Collateral and property losses are typically severe and concentrated to specific locations. Lenders remain liable for insurance coverage and claims jump significantly during these events . Additional challenges that emerge include adhering to federal regulations and staying abreast of state bulletins and guidelines, payments are often delayed due to evacuations by the consumer or consumer’s agent, and paying bills become low priority. 

However, having a plan in place can make all the difference between responding effectively or simply reacting to a natural disaster.


Read Related Article: What’s My Next Step in Disaster Preparedness?


6 Strategies to Proactively Plan 

1. Set an Annual Review to be Reactive and Proactive: Set time annually to review your business continuity plan to make sure it is still good to go or to make tweaks that would help improve processes through an active catastrophe. This plan should include process for before, during, and after catastrophic events. It’s also an opportunity to consider performing internal drills and ensure staff understands their roles and responsibilities. 

Components to review can include: 

  • Remote location access protocols should branches be impacted by the catastrophe
  • Borrower communication plan to keep them informed on what's going on and what to expect for continued service
  • Develop a notification plan for the immediate days and follow-up months for how you plan to handle displaced coverages and escrow payments
  • Review third party partners that provide services for   escrow payments, insurance coverage, collateral recovery, and data reporting to better mitigate risk

2. Establish Dedicated Staff to CAT Management: By reallocating staff to a dedicated claim team and call center during catastrophic events, you can ensure your business can support borrower needs during this claim-heavy time. To expedite claims processing and simplify borrower needs, a designated email address or phone line can be directed straight to the CAT team. These dedicated teams may have slight modifications to handling claims and document requests in order to streamline the process. By having staff in place ahead of time institutions can more immediately assess their exposure and respond efficiently instead of simply managing damage control. 

3. Determine Internal Monitoring Taskforce:
When a catastrophic event occurs it’s important to have a team in place to monitor the situation. A team charged with monitoring the situation can help institutions adapt quickly to unanticipated events and assess ongoing risk exposure, which then allows for more effective decision-making to determine resource needs or additional support. 

4. Stay Informed by Following Data Sources: Having access to the right kind of information during a national catastrophe will give you an advantage in managing your financial losses and internal operations before, during, and after the catastrophe. This can include data and educational resources from partners and vendors, or government agency resources focused on disaster prep and response. Live updates can help build a stronger picture of impacted areas and offer guidance on how to deal with loan reinstatement, loan arrangements, collection activity, repossessions, and foreclosures.

Helpful data sources include:

CFPB Resources
• Insurance Carrier Data

5. Develop Communication Tools and Processes: Communication plans should include both internal and external messaging with information to alert employees and borrowers across multiple channels (such as: email, call, text, etc.). Communication should be triggered at the onset of the event, as well as updates as needed. 

For internal communications: Updates advise on the current status of exposures and claim dollars spent. A final communication should be sent when a catastrophe in considered ‘closed.’
For external communications: Alerts provide borrowers with high level exposure information and claims processes, and provide contact information for lender support.

6. Invest in the Right Tools, Services, and Partner: Third party partnerships can help greatly 
reduce the burden natural catastrophes bring. There can be less disruption to service process and more resources available to deploy. These partners can include product providers and vendors, insurance carriers, and other outsourced services. 

By being proactive and putting a plan in place, financial institutions can be ready to respond quickly and effectively when the unexpected occurs. Learn more about Allied’s CAT Response here.


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About Allied Solutions

Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology-based products and services customized to meet the needs of over 4,000 banks and credit unions, along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains over 10 regional offices and service centers around the country and is a subsidiary of Securian Financial Group, Inc.


Content in the blog posts are the opinion and views of the writer, and don't necessarily reflect the opinions or views of Allied Solutions.

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