Pay for play leisure risks

Rough Notes, Sep 2003 by France, Larry G

Today's market-more paying, less playing

In most cases, the public's participation in "fun business" is governed by the number of extra dollars they have to spend in their leisure time. The economy, high gas prices and fear of traveling by air have caused the average American to rethink leisure expenses. Although the economy is much better than a year ago, many people are still uncertain about what they can spend for leisure activity. On average, length of vacations has been reduced by several days. That translates to less spending, not only on hotels and food but also admission to amusement parks, miniature golf courses, and trail rides, to mention a few. If the average family takes two fewer vacation days, that can amount to significant dollars. Some of the smaller operators haven't been able to afford to take that revenue cut and have simply closed.

The record number of unemployed has also lessened the numbers going through turnstiles. The people who decided to drive instead of fly were met by high fuel costs that fluctuated by 15 to 20 cents from morning to that afternoon. Buying a tank of gas was like playing the stock market. Drivers were placing a "buy order" when it fell below $1.50 per gallon. So the cost of transportation has been a factor as well.

Many leisure-related facilities, depending on their size and type of operation, were faced with extra costs such as additional security that involves screening, and transportation from outlying parking lots because the closest ones to the gate were blocked off. The bottom line: more cost to operate with less revenue.

The insurance industry can take some credit. In the past, on the part of some, lack of proper underwriting and the haste to build premium volume without concern for protecting the market either drove the carrier to withdraw or elevate the acceptance of the risk to where none would qualify.

All of these factors have left us with fewer choices for placement. The good side of that coin is that the majority of those that remain are very solid because they SIf had the foresight to underwrite the risks and not succumb to the temptation to disregard proper risk selection. Their carrier was still in tact and willing to continue to be a player in the leisure arena.

Bob Briggs, marketing director for Hull &Company, says that prior to September 11 the number of leisure risks in the United States grew substantially, with more young people testing their limits and looking for adventure. Some of the most popular leisure activities over the past few years, according to Briggs, have been family fun centers, water parks, water slides, climbing walls, virtual reality centers, Indy go-cart tracks, and horse trail rides.

"In the post-September 11 market," says Briggs, "there are fewer carriers seeking this type of business with reinsurers looking for more standard risks. This has limited the availability of capacity for these types of accounts. Now there are a handful of carriers that specialize in leisure accounts competing for the recreational risks, and only one or two that will entertain horse trail rides and related activities."

Briggs explains that although pricing has remained constant at previous levels, the problem has been finding a carrier for the difficult risks. He says, "The market for jet skis has really been hit hard and few companies offer coverage for rentals now." Briggs says that Hull's success in this area has come from their ability "to maintain close relationships with our leisure risks carriers and being careful to stay within company underwriting guidelines. It has helped us become a leader in this field."

That attitude is one that many don't have the stamina to adopt in this or any other class of specialty business. Sooner or later, (later, it is hoped) some markets will start to creep back into the leisure business with rates that will not sustain a premium base conducive to an underwriting profit. As in the past, they steal away into the night, leaving a carrier wondering what happened and clients looking for a last-minute solution for their coverage. This is the reason that there are few choices today.

It is a good idea to select a market that has been placing this type of business for some time and understands how to loss control underwrite, and price the account so the client will have a home at renewal time next year. It may also have a bearing on your agent's E&O future.

The following have responded to our survey and indicated that they are a market for all or selected classes of the leisure class pay for play. Be sure to pay attention to territories of operation.

Burns & Wilcox, Ltd.

30833 Northwestern Hwy, Ste. 220

Farmington Hills, MI 48334

Contact: Call 800 number for local branch

Phone: (800) 521-1918

An MGA/E&S broker that operates in all states except HI, MA, ME, NJ and NY with primary limits of $1 million and excess of $10 million. Target markets vary by company. Can write inland marine, property and event cancellation. Various carriers are used to place coverage.