Strap the skis to the roof rack and throw the chains on the tires-it’s time to head to the mountains. For avid skiers, “weekend warriors” and “flatlanders” alike, the winter months mean long, perfect days of groomed trails, bumps and jumps, and the occasional dumping of fresh powder. And what’s a day on the slopes without an aprés-ski session-an ideal time to talk about the day’s adventures-and the liabilities involved in the ever-popular recreational sport of skiing.
In the United States, during the 1999-2000 season, there were 52.2 million skier/snowboarder visits with 503 ski areas in operation, according to the “Kottke National End of Season Survey 1999-2000” prepared for the National Ski Areas Association (NSAA) by RRC Associates, a research firm in Boulder, Colo.
The 1999-2000 season’s total visits increased 0.2 percent compared to the 1998-1999 season’s reported 52.1 million. And even though it was the second year in a row with less than optimal snow conditions, ski area attendance was better than anticipated.
“The industry is very well served in our opinion by the fact there are people who have specialized and made it their life-long occupation and are all clamoring for-and aggressively competing for-market share,” said Carl Neu, program manager at Acordia.
Steve Wild, account manager for the ski resort program at K&K Insurance, agreed that there are not a large number of competitors when it comes to writing this type of coverage. “It’s such a small universe that it’s heavily fought over among the carriers,” Wild said.
The four primary competitors in today’s ski insurance market include Willis, Acordia, K&K and Tennant Risk Services/CNA E&S.
By introducing its ski area program in 1963, Willis/AIG led the way in writing coverage for the ski resort market. Today, they insure more than 100 ski area resorts in the U.S. and Canada.
“We offer most p/c coverages, brokered and direct, in-house claims, engineering and policy issuance,” said Frank Freeman, senior vice president/branch manager Willis New Hampshire Inc. “We also have a resort program with AIG that handles a very broad spectrum of recreation exposures-it’s a newer program built off our experience with the ski program.”
Neu and Brian Derouin, also with Acordia, said the company has been writing coverage for ski resorts since the late ’60s. “[In the early days], we were producing coverage for another program, then we started our own program in 1974, and we’ve basically been a program manager since that time,” Neu explained. Today the company writes roughly 100 resorts in approximately 25 states.
So what does Acordia do to stay one step ahead of its competitors?
“We try to find a balance between our client base and our carriers so that we’re able to maintain a healthy, stable program and not constantly move from insurer to insurer,” Neu said. “There needs to be a fair balance. The client is entitled to fair treatment…and right along with that, if you’re going to provide those things to this industry and have a product available to them year after year, you have to treat the underwriter fairly also.”
K&K has been writing coverage for ski areas since 1989 and currently insures 220 resorts in the U.S. and Canada. “We specialize in what we consider the medium- to smaller-size areas,” Wild said.
According to Wild, K&K’s deductible for its ski resort policy is slightly different than its competitors. “Expenses are not subject to the deductible, so if you take a case to court and you win that case, we don’t go back after the expenses through the insured. We will pay those ourselves,” he said. “We always like to say that when an insured wins a case, he truly wins a case.”
As the newest entrant, Tennant Risk Services’ objective is to selectively add resorts to its program, according to Bob Sargent, president of Tennant Risk Services. Sargent and Tony Hirsch were the principal architects of the Tennant Risk Services and CNA E&S ski program introduced about a year ago. Both gentlemen have 10 years of experience insuring ski resorts. “We place a high degree of value on our risk management and claims handling services, and have assembled an experienced team for this purpose,” Sargent said.
Tennant Risk Services writes all lines on an admitted basis in all states with ski business, with the exception of workers’ comp in a few states. “Our program has been structured to be ‘agent friendly’ and is open to retail agents around the country,” Sargent said.
Snowball effect hits the industry
Just as a wave of consolidation has swept across the insurance industry, the ski industry is caught in a consolidation snowstorm of its own, according to Jim Chalat, a principal of Chalat Law Offices in Denver.
“It’s no longer an industry that can be run by a family in many instances or by a public entity,” Chalat said. “I think the insurance industry will find that there are fewer and fewer players and therefore the larger companies will demand lower premiums. At least at the large resorts, you will find much higher self-retained insurance or deductibles.”
For K&K, ski resorts have historically been a profitable line of business. “But it’s something that’s always changing,” Wild said. “The [state of the] overall market for ski resorts is somewhat typical to the rest of insurance, whereas there is a real firming in the marketplace. We’re seeing areas that maybe struggled from a profitability standpoint that are taking some increases, while the rest of the areas maintain their rates.”
The buzzword that Acordia’s Neu used to describe the ski industry is “flat.” “I’m not saying that [the ski industry] is necessarily static, but it’s a pretty level exposure base and probably the single biggest denominator for good or bad is the weather. It’s comprised of skiers and snowboarders, but there isn’t tremendous growth in skiing itself; instead, there’s growth in other ancillary activities,” he said.
Those ancillary activities include golf, tennis, horseback riding and mountain biking. It’s a way for destination resorts to round out the seasons so that they are able to maintain year-round staff as opposed to seasonal staff. “There has been quite a lot of capital spent in the expansion of these resorts…for all of the things that lend themselves to a mountain environment without snow,” Neu said.
With weather as the major factor of overall skier participation, can a ski resort buy an insurance policy to cover a no-snow season? “There is a policy to cover bad weather, but we don’t provide that policy,” Wild said. In fact, due to the abnormally warm and dry early season conditions last year, many insurers no longer write this type of policy.
Instead, Wild said that K&K’s policy provides workers’ comp, general liability, excess, property, auto and crime. “And within the property portion is a business income coverage,” he said.
Just like K&K, Acordia writes a very broad form of coverage. “The key or the thing that has always been the trigger to this is the liability piece,” Neu said. “Liability policies generally and typically measure exposure, and our policy does the same thing by measuring revenues and applying a rate to the revenues.” Neu explained how that is pretty universal for both Acordia’s programs and other programs.
“Basically, the liability policy is adjustable. Premiums move up and down with the ski area’s revenues,” Derouin said.
Ski at your own risk
For general liability coverage, ski resort claims typically fall into three types of claims: premises, lift or skiing claims. “The most difficult and volatile to insure are the skiing claims,” Tennant’s Sargent said.
Last year, NSAA, along with the National Ski Patrol, the Professional Ski Instructors of America, American Association of Snowboard Instructors, and Willis and AIG, created the Safety Initiative 2000 campaign to help ski area operators nationwide address the topic of slope safety education for guests.
“There are a number of statutes in a number of states that put the onus back on the skier to stay in control and not to collide with other skiers,” Derouin said. “It’s really up to the individual to determine whether he or she is capable of going down a particular trail at a particular time.”
“People get injured skiing, they get injured biking, they get injured in all kinds of athletic activities, and we really don’t deem those to be negligence on the part of the resort,” Neu added.
According to Chalat, ski resort claims are really very minimal. “A typical ski resort claim according to the Annual Economic Survey of Colorado Ski Resorts…demonstrates that the cost of insurance…is less than 10 cents per dollar of income, and that includes all of their insurance,” he said.
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