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WEATHER PHENOMENON'S EFFECTS REMAIN UNKNOWN

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If you found El Nino unpleasant, wait 'til you meet his nasty kid sister La Nina.

Just how nasty La Nina might be isn't known yet. The weather phenomenon could spawn an unusually violent Atlantic hurricane season, or it could result in a year of average activity. It might mean unusually high rainfall in the already rainy Pacific Northwest, or it might not. It could plunge the North into a deep freeze this winter, or normal temperatures could reign.

Property loss control experts accordingly agree that such uncertainty makes it all the more imperative that risk managers be prepared for any reasonably likely impact. That means applying the same foresight about property exposures that they would when confronting any known peril.

"You just need to be prepared for those storms" regardless of whether it's called El Nino, La Nina or something else, said Peter J.G. Willse, a research consultant with HSB Industrial Risk Insurers in Hartford, Conn.

Like El Nino, La Nina doesn't in and of itself present an exposure. Instead, it magnifies or distorts existing perils.

"La Nina is the opposite of El Nino," pointed out Lixin Zeng, principal researcher-underwriting research and development unit at Arkwright Mutual Insurance Co. in Waltham, Mass. In El Nino, abnormally warm waters in the eastern Pacific cause weather disturbances. La Nina happens in the wake of El Nino as colder waters rise to the surface, he said.

"I think we're in a situation now where we can look at more climatological eras. It's pretty clear when there's a strong El Nino event, the hurricane activity in the North Atlantic basin is a lot less than normal. Generally, when we look at La Nina events, which is a cooling in the Pacific, there are generally more hurricanes in the Atlantic basin," said Anthony Knap, director of the insurance industry-backed Risk Prediction Initiative at the Bermuda Biological Research Station.

Arkwright's Mr. Zeng said increased Atlantic hurricane activity presents commercial underwriters their greatest La Nina concerns. He pointed out that a moderate La Nina in 1995 and 1996 spurred high hurricane activity in the Atlantic.

Mr. Knap said that because this year's La Nina cooling is "happening later than what normally happens in some of the previous La Ninas that have been studied," its impact is unclear.

"When a La Nina happens after a very strong El Nino, we don't have a lot of data to say what happens then. Because it was such a strong El Nino, it's happening later in the year than it normally would. It will be difficult to tell whether this will significantly affect the hurricane season in the North Atlantic other than roughly calling for an average year," he said.

But La Nina-related concerns don't stop with the possibility of Atlantic hurricane activity, Mr. Zeng said. Higher than normal rainfall and a greater than normal frequency of rainfall in the Pacific Northwest also could occur. The Southwest -- and to an extent Florida -- could experience drier and warmer conditions than normal courtesy of La Nina, thus increasing the threat of fire, including wildfires, he said.

"La Nina cannot be ignored," said Mr. Zeng.

The threat of La Nina underscores the lessons risk managers learned from El Nino, said Jim Pinzari, vp-crisis management and planning services in J&H Marsh & McLennan Inc.'s Boston office.

"I think probably the biggest thing we learned from El Nino is that weather conditions are changing so dramatically on a global basis that none of our companies can really feel a sense of security no matter where they're located in the country."

"I think we're going to start seeing some very severe weather patterns in parts of the country that didn't experience such conditions before," he said, pointing to the unusual flooding around Boston earlier this year.

"Be prepared for anything," he said.

That's how risk managers are approaching the La Nina, though they emphasize that being prepared for anything is simply good risk management regardless of whether an El Nino or La Nina looms.

"I don't know what kind of company would have done something differently because of El Nino," said Steve Wilder, vp-risk management for The Walt Disney Co. in Burbank, Calif. Climatic disturbances such as El Nino and La Nina present the same exposure as risk managers deal with routinely, just more of it, he said.

John A. Davenport, assistant vp and director-research for HSB Industrial Risk Insurers, agrees: "They're more frequent and they're probably more severe but they're still the same windstorms and flooding that we've had," he said.

"From a risk management basis, I don't think it should much change whether it's El Nino and La Nina or any other term," said Steve Sachs, senior vp at Hobbs Group L.L.C. He acts as risk manager for Columbia, Md.-based Rouse Co., a national commercial real estate developer.

"If you're located in coastal areas that are subject to significant windstorm exposures, you need to be prepared. That preparation -- much like risk financing -- should have a longer perspective than the story du jour," he said.

Fortunately, risk managers probably are better able now than ever to prepare adequately for the impact of La Nina.

"Certain weather conditions don't have to be a surprise any longer. In general broad terms, we know that El Nino leads to certain conditions," said Klaus Gebhardt, senior vp and chief underwriting officer for Arkwright.

Patrick Musick, assistant vp at the Alliance of American Insurers in Downers Grove, Ill., said, "The kind of publicity around El Nino and the high profile meteorologists had in the media should impress on risk managers and the public in general that there are these trends in weather events and that the next time an El Nino event occurs, people should expect certain things to happen."

With La Nina, "I think they realize that the trends are going to change, that there will probably be more hurricanes in the Atlantic" and because of differences in the warming or cooling of particular areas of ocean, the hurricanes will have different intensities, he said.

Colorado State University Professor Bill Gray recently issued his final Atlantic hurricane season prediction for the year. Mr. Gray said that while La Nina's effects probably won't be felt until after the peak of the hurricane season in August and September, there is a 66% chance of an "intense" hurricane -- one packing winds of more than 111 mph -- hitting the U.S. mainland this year. Mr. Gray predicts 10 tropical storms will form this year. Six of the storms will become hurricanes, he said. In contrast, last year's El Nino helped quell the Atlantic storm season, which was marked by only three hurricanes.

When conditions start to turn bad, risk managers need to pay particular attention to local weather reports, said David Czartoryski, senior vp-risk engineering services, Zurich Services Corp. in Schaumburg, Ill. Their contingency plans should be in place, and contracts giving the company priority access to contractors should have long since been signed with local contractors. Having guaranteed access to key contractors is crucial in disaster recovery, he said.

Preparing for power outages is critical, said Stuart Ulsh, special projects engineer with Factory Mutual in Norwood, Mass. He cited the experience of a U.S. food processor, which he declined to identify, to illustrate how such preparation pays off. The company tracked a hurricane and lowered its freezer temperatures as low as possible before the storm struck. Despite the subsequent loss of power, the processor weathered the storm well, he said.

"Expect the unexpected" as well, said Mr. Ulsh. El Nino caused a desert mountain area in South America that normally receives less than 3 inches of rain a year to receive 2 to 3 inches in one day, he said. That led to flooding, power failures and damaged railways.

Regarding La Nina, risk managers should "take all information that's starting to come out" regarding which areas will be colder, wetter, drier or otherwise suffer abnormal conditions and "give it a third look," he said.

Risk managers "at any plant in the world" should consider possible perils and -- after ruling out the totally impossible -- be prepared for whatever La Nina or any other disturbance could bring, he said.

J&H Marsh & McLennan's Mr. Pinzari said he's advising clients "when you look at what they're predicting for La Nina, such as extreme cold in the northern part of the country," clients should begin preparing for the impact by, for example, making certain they have access to rock salt.

Risk managers in the Pacific Northwest shouldn't store merchandise on the floor because of the increased chance of flooding, said Arkwright's Mr. Gebhardt. Even in areas that don't normally flood, rising ground water could cause problems, he said.

In addition, there should be "no yard storage; make sure the outside equipment is properly tied down, and have a full-fledged contingency plan ready long before the event," he said.

Factory Mutual's Mr. Ulsh urged risk managers to practice their disaster plans, which should be developed with input from many people rather than one manager.

He pointed out that some people have made a serious mistake by deciding which equipment to move out of harm's way based solely on property value without stopping to think. Other equipment might cost less but also be harder to replace or repair, he said. If that equipment isn't protected, business interruption will last longer and cost more, he said.

"The message should be, 'Do it now.' Now you have the time; then, you won't," said Arkwright's Mr. Gebhardt.