Hard insurance market expected to continue; new risks emerging - Risk Management

Camping Magazine, Nov-Dec, 2002 by Ed Schirick

Are You Ready?

Camp directors, risk managers, and insurance buyers throughout the U.S. discovered a more difficult and risky insurance marketplace in 2002. It was characterized by higher prices, more restrictive coverage, and lower limits for certain risks. Some camps, especially those with adventure travel formats, found it difficult to find insurance at all, as some underwriters withdrew from that segment of the market. Most camp directors paid more for their insurance and retained more risk in 2002 than they did the year before.

As we look forward to 2003, camp owners, directors, and boards of directors will continue to be challenged by unstable economic news and uncertainty created by our continuing war on terrorism. Corporate accounting scandals will continue to increase economic uncertainty as executives accused of wrongdoing have their days in court. The federal deficit will add fuel to these uncertainties as the U. S. continues efforts to change its intelligence community and develop an infrastructure to protect Americans at home and America's interests abroad.

In addition, the safety of children will continue to be a major concern for parents. The risks of sexual misconduct and child abduction, every parent's and camp director's nightmare, became all too real again in 2002. Camps will continue to be challenged by these issues and held to steadily higher parental expectations of care and safety.

Uncertainty at home and abroad means you can expect more changes in the insurance marketplace in the year ahead. The September 11 attacks provided impetus for U. S. insurance companies to increase rates and make changes in the types of risk they were willing to assume. Many of the changes attributed to September 11 were actually already well underway before the attacks. But, following the events of that day, new risk and insurance issues surfaced, which were previously not anticipated, or clearly identified. These new uncertainties added to the impact of the insurance marketplace changes and altered the risk appetite of many underwriters.

Terrorism Exclusions

As the insurance market continues to "harden," expect more rate increases and more restrictions or clarifications of coverage. For example, some underwriters took the opportunity to attach terrorism exclusions on property as well as liability, insurance policies in 2002. This will become more widespread in 2003. It should come as no surprise that terrorism is one of the new risks and realities of our post September 11 risk management and insurance world.

The insurance industry is seeking federal government support in order to continue providing insurance protection against terrorist acts. Negotiations in Congress on this issue stalled in late summer. But, support will be forthcoming because some banks are now unwilling to lend money to certain businesses and real estate ventures without property insurance protection for terrorism. There is a lot at stake economically. Expect an eventual compromise--perhaps even before the fall elections.

How does an exclusion for terrorism affect your camp? After all, camps have little or no exposure to terrorism, right? Or do they? Consider the international counselor placement programs and how many staff you hire through them. Do you have foreign campers? What impacts will the risk of terrorist acts on U.S. soil and America's continuing war on terrorism have on foreign staff, campers, and their families? Should you be taking any action to manage those risks? If you haven't given this issue much thought take time to reflect on it now, while you can still think about the issues quietly. Anticipate problems and consider how to manage these new risks while there is still time to do something about them. The risks of terrorism are not strictly limited to bodily injury to people and damage to property. Remember that your business assets are both tangible and intangible. Don't forget that perceptions can create reality, which is sometimes different than the facts. Consider the "big picture" of possibilities.

Other insurers are attaching or planning to attach property and liability exclusions, which eliminate coverage for the risks of bodily injury to people and damage to property associated with toxic mold, mildew, fungus, and certain biological, or pathogenic agents such as anthrax, for example. As these exclusions are finalized and put on your policies, new risk management practices must be developed. We'll know more in the months ahead. In the mean time, take some time to educate yourself about these risks and consider what they may mean to your camp.

Internet Activities

Other subtle insurance policy changes were underway in 2002 that will impact your insurance coverage and risk management practices. Periodically, insurance companies revise and update the coverage they provide to their clients. Sometimes these changes involve expansion of coverage. Sometimes the revisions restrict coverage. Often these changes are done through endorsements to the insurance contract. But, sometimes the entire contract itself is rewritten.