By Andrea Wells

Small businesses are not immune to the increasing frequency and intensity of severe weather-related events. Even a lengthy power outage from a winter storm can be a threat to small businesses, leading to economic damage that is difficult to overcome.

“Winter risk is no longer

defined solely by snow accumulation or short-lived disruptions,” writes Monica Ningen, CEO of Swiss Re’s US P&C business, for this issue’s Closing Quote (see page 50). “Today’s storms bring a combination of extreme cold, heavy precipitation, ice, flooding, power outages, and extended recovery timelines.”

Research suggests the primary risk facing small businesses after natural disasters is an extended business disruption which can sometimes lead to permanent closure. The longer it takes for a business to recover from a disastrous event, the more likely that business is to fail.

The trend of billion-dollar natural disaster events is continuing. Billion-dollar events increased from 6.7 events per year from 2000-2009, to an average of 23 events per year from 2020-2024, according to the National Centers for Environmental Information. Insured losses from natural catastrophes topped the $100 billion mark in 2025 for the sixth consecutive year. While the main driver of loss in 2025 stemmed from the Los Angeles wildfires, severe convective storms remain a major global loss driver, reports Swiss Re Institute. Global insured losses from severe convective storms alone were $50 billion last year, making 2025 the third costliest year after 2023 and 2024.

So, what can small businesses do to prepare for the next disaster, and how can their insurance partners help? To safeguard against disastrous scenarios for the small business client, insurance partners should make sure that before disaster strikes, their clients have insurance coverage that is adequate and preparedness plans that will ensure business continuity.

Small Business Risks

The small business insurance market, as well as the personal lines sector, have both entered 2026 in a stable position, according to Amwins’ Small Business and Personal Lines Outlook. After years of disruption and rate escalation, market conditions have begun to normalize with average rates softening in some property classes, and capacity and underwriting appetite returning to segments that had become constrained. But natural catastrophe exposures remain key areas of concern, especially in highly populated areas, the report said.

“Severe convective storms, once principally confined to ‘tornado alley,’ have become a nationwide concern. In response, underwriters are deploying detailed geographic modeling to assess micro-region risk (i.e., Los Angeles hill area). Carriers are also increasing scrutiny of roof age, considering it even more important than building age in how a property responds to a wind event,” the report said.

Like much of the personal lines market, the small business owners’ insurance market faced severe frequency and severity of natural disasters over the last several years, William King Sr., director of commercial underwriting at Progressive Insurance, told Insurance Journal. “As a result, geographically disaster-prone areas experienced higher premiums, limited availability, and/or increased use of cost sharing terms from insurers,” King said, adding that because small businesses often operate with tighter or limited safety nets, closing after a natural disaster can be challenging.

Market Conditions

Kristin Thelen, assistant vice president, account management at Insureon, Hub International’s small business focused digital agency, said that while the market overall has softened, there’s still a lot of volatility on pricing for small business in higher-risk areas.

“We’ve definitely seen a shift in specific states wanting to write business property; in particular, Florida and California are still problematic,” she said. “We have carriers pulling out of states. The carriers remaining in those states, (have) very high premiums, very high deductibles, and lots of natural disaster exclusions, if you will.” Thus, retaining business has been a challenge for some carriers, she added.

Jerry Palmioli, director of sales at Insureon, said that changing carrier appetites remain an issue. “Carriers are changing their appetite almost monthly,” Palmioli said. “One disaster, one big claim, one storm happens, and carriers are worried about their profit loss margins.”

‘When a secondary peril event occurs, like flooding, especially like the inland flash flooding that dominated 2025, small business owners oftentimes are left with zero recovery funds.’

Palmioli said that disasters can also lead to a changing risk profile for some small businesses. “We see that on the underwriting side. … It could be a contractor, and because a storm came through an area, now everyone wants to be a carpenter in Florida after a storm, so the underwriting guidelines could change very dramatically for getting insurance,” he said.

Counseling insureds to purchase coverage for the long term is just as important for the small business client as it is for larger commercial clients. “Don’t just buy coverage for the project, buy it for the long term, otherwise you may never get insured again in the standard markets,” Palmioli said.

Insureon’s Thelen added that success in small business, like with any other commercial insurance, comes from ensuring that the right coverage is offered through a consultative approach. Making sure to have proactive conversations on how the business can mitigate losses–whether it’s property, cyber, or umbrella coverage–and tying those conversations to real life scenarios is key, she advised.

Coverage Gaps Post-Disaster

Small businesses are more vulnerable in post-disaster situations oftentimes due to limited cash reserves that could help keep the business afloat. The disaster disrupts operations, creating an uncertain path to recovery.

Flooding poses a significant threat to small businesses, impacting operations, finances, and long-term stability. “When a secondary peril event occurs, like flooding, especially like the inland flash flooding that dominated 2025, small business owners oftentimes are left with zero recovery funds,” said Colin Tinley, senior vice president at Amwins Access. “If you don’t have coverage for those secondary perils like flood, you may have a gap when it comes to recovery.”

Ensuring that small businesses have adequate business income can reduce the coverage gap and help the business outlast disaster-related closures. But it’s important to choose the right type of business income coverage, according to Progressive’s King.

“Some policies cover the actual loss sustained (ALS) for a certain period of time, and others have specific business income limits,” King explained. “If your coverage is ALS, it is important that the covered time period is substantial enough for the potential closures you may experience. If you have specific limits, then you need to ensure the limits are high enough to support your business needs during the potential closures.”

Amwins’ Tinley added that while small business owners have become more aware of the need for business interruption coverage, there’s still a protection gap in coverage, especially when it comes to floods.

“At the end of the day, if a business isn’t carrying a separate flood policy and a flood shuts them down, their standard BI is typically not going to trigger,” he said. “In addition, if you have a small business and you have an NFIP policy, business interruption is not going to be covered on that policy. So, you could have flood coverage but not have business interruption coverage.”

That’s where the private market can play a key role, he said. “The private market can come in, provide a solution,” he said. “With overall property rate softening, now is a good time to think about how those coverage gaps can be covered,” Tinley suggested. “Because if they’re getting significant rate reductions on their property, we can then come in and say, ‘well, your client may now have some extra funds to increase their overall coverage. So, have you thought about coverage for flood? Have you thought about coverage for business interruption?’ Something like that,” he said.

Progressive’s King encourages agents to check in on their small business clients periodically to possibly adjust coverage limits that might better align with the business’s changing needs, especially as the small business grows over time. This is where working with an agent can help, he said. “Working with an agent can help provide more confidence and expertise in choosing the right coverage and policy for your business needs and also assist with navigating the claims process,” King said. “Often, growth or changing business operations could result in different insurance needs like expanding locations, higher sales, or hiring more employees, so it’s encouraged for business owners to engage with their agents on a regular basis.”

Small businesses, whether they have business income coverage or not, can potentially reduce impact and loss from weather events with business continuity planning, King added. “Business continuity planning helps small business owners understand their risks and identify preventative measures, including actions they can take pre- and post-event to reduce loss.” He also suggested that small businesses revisit their plan often to ensure it is up to date.

Topics
Commercial Lines
Business Insurance