Growing Market for Ski Insurance Faces Some Slippery Slopes

Owners of ski retail and rental shops and ski resorts may see some tougher conditions this year, as the ski insurance industry faces the overall hardening of the property/casualty market. More scrutiny in underwriting and increased areas of exposure may be hitting the slopes this season, along with the snow-loving crowd.

“Certainly the market is changing in a way similar to others in property and casualty,” said Bob Sargent, president of Connecticut-based Tennant Risk Services Inc. “We’re seeing rate increases, more underwriting scrutiny on specific accounts.”

According to Sargent, retail and rental shop operations are not seeing quite as much of a crackdown in underwriting as the larger resorts since they don’t have the same level of exposure. In addition, Sargent pointed out that the larger resorts buy more limits.

The ski industry has been transfigured over the past decade, with changes in products, lift technology, recreational trends and even corporate structures.

The nitty-gritty
Tennant Risk Services provides its Ski Industry Insurance Program to cross country/nordic centers, retail and rental shops, resorts, clubs, ski product manufacturers and other ski organizations.

The main focus of the program is the high exposure lines of general liability and umbrella liability. Tennant Risk also provides property, automobile, inland marine, boiler and machinery, crime, directors & officers liability, employment practices liability—all lines of p/c insurance except workers’ compensation.

Significant capacity is available for EPL coverage, providing protection to the insured for certain employment-related claims. The coverage typically responds to employment-related wrongful termination, discrimination and sexual harassment claims.

Underwriters of a ski insurance program typically look at the history of the business and whether it has had a high or low number of losses over the years.

“Underwriters look to see what type of operation it is,” Sargent said. “Relative to a couple of years ago, someone who’s had problems will have a tougher time getting coverage. A couple years ago, people were pretty lax about reviewing the loss experience, but that has generally tightened recently.”

Joe Hannigan, vice president of marketing for THE Insurance Co., based in Treasure Island, Fla., concurred that background is an all-important factor.

“When an underwriter prepares to write this coverage, they look for loss experience and the continuity of the management,” Hannigan noted. “If they just opened up a new area, you want to make sure they’ve got the right loss control measures in place to avoid a major loss.”

How big is the market?
Sargent noted that only a small group of insurers offer this type of coverage. “Some of the more mainstream carriers who have written this type of program in the past in a sort of dabbling type approach are getting out, while the people who have written it on a program basis are staying in,” he said.

Hannigan echoed those sentiments, noting that the market greatly impacts the types of coverages insurers will write. “When the market starts to harden, people tend to go back to what they do best,” he said. “What we do best is amusement and entertainment, so we’re there to stay for the long haul.” Hannigan estimated that THE Insurance Co. writes policies for 50 to 100 businesses specifically for ski insurance.

One thing that can put a snag in coverage is a high amount of exposure. While the smaller facilities and shops have more “plain vanilla-type exposures,” the bigger resorts typically have more complicated exposures, according to Hannigan. They also face an increased threat of litigation, sometimes scaring away potential insurers.

However, litigation is pretty much on track with where it has been in the past, according to Sargent. “The industry gets a fair amount of litigation to begin with; it really hasn’t changed much,” he commented. “There is still a fair amount of activity.”

When asked what influences pricing, Sargent said that customers usually have more of an impact than location. “Loss activity tracks with customer activity. From a risk standpoint, I don’t think there is a whole lot of variation. There is usually a rate and it is generally applied to either number of customers or revenue.”

What does the New Year hold?
Evaluating the ski insurance market for the coming year in a post-Sept. 11 environment, Hannigan noted that some ski areas just won’t survive due to the costs involved.

“The marginal risks are not that insurable,” Hannigan said. “Even the good risks are finding that their attendance and receipts will likely be down, based on their projections with what the ski industry will be like this year.

“This line of writing, if you price it responsibly, can be profitable—it has been for us. We’re finding the risk is going up with a lot more tubing and snowboarding—those activities include a lot more risk than your straight skier. One of the big trends in the ski areas is that they’re adding more types of entertainment, more year-round activities…You’re going to find the best business for this in some of the states in the Northeast and across the West—that’s where the big resorts are.”

As for 2002, Sargent expects a continuing slow increase in premiums and much tougher underwriting scrutiny for specific accounts, possibly leading to more insurers lifting their ski insurance programs for something on a little more solid ground.

Topics Underwriting Property Casualty