Golf and Country Clubs Weather the Storm

Snow in October, hurricanes in the Northeast and record-setting “derechos” in the Ohio Valley and Mid-Atlantic regions are a sampling of the unusual weather that is changing the way insurance carriers evaluate property risks for golf and country clubs.

Golf and country clubs still whet the underwriting appetite of carriers, but expanding property-catastrophe (CAT) zones are affecting availability and terms of coverage. Agents and brokers writing clubs should understand these changes, as well as the steps they can take to mitigate risks and provide accounts with the most favorable terms.

It’s Not Just About Sandy

Four significant weather events have affected clubs in the Northeast and Mid-Atlantic regions in the past two years. A snowstorm in March 2011 brought down trees on courses across the region, followed by Hurricane Irene, which made landfall in North Carolina, Little Egg Inlet, N.J., and New York City. The 2011 “Halloween Nor’easter” piled snow on trees with leaves, causing a high number of downed trees and branches.

A year later, Superstorm Sandy caused an estimated $25 billion in insured losses. The storm has forced insurers to reconsider their catastrophe exposures in the Northeast, according to the April 2013 “State of the Market” report published by NAPCO LLC, a property catastrophe specialist. The report notes that catastrophe models, risk assessments and pricing in these regions will become more in line with practices in the Southeast region.

Meanwhile, the Ohio Valley and Mid-Atlantic in June weathered derechos – widespread, long-lived, straight-line windstorms associated with a fast-moving band of severe thunderstorms – including the highest recorded June or July wind gusts at several sites along its path. Five million people lost power from Chicago to the mid-Atlantic coast, and 22 were killed.

The Midwest and Southeast faced the largest tornado outbreak ever recorded, including four tornados in Alabama in a two-week period. The following month, Joplin, Mo., was leveled. In Texas, windstorms and hail moved inland, bringing down trees, tearing up greens and causing some risk models and carriers to call the entire state a “CAT state.”

Risk Models Expand CAT Zones

As once-random weather events have become the norm, risk models are being revised to account for the extreme weather patterns and are expanding their definition of CAT zones. At golf and country clubs, downed trees and branches have caused the bulk of the damage, causing a significant increase in claims for trees and debris removal.

Trees aren’t the whole story, though. Hail can accompany windstorms, with one Texas course reporting as many as 4,000 divots on its 18 greens, as it prepared for a PGA tournament. Sandy caused flooding on coastal courses in New Jersey, Long Island and Connecticut, damaging club buildings throughout these areas. Some clubs have not reopened.

As we moved into 2013, some of the largest providers of club insurance, which were offering full tee to green coverage with limits of $1 million to $2 million, now are sub-limiting tree debris cleanup and removal with much lower limits. For clubs in locations being classified as CAT zones, the impact on property rates is more severe.

While property rates are going up 10 percent to 15 percent in many areas, these increases have been tempered by the popularity of the golf and country club industry among carriers. Ample capacity has softened the impact on price compared with the overall hospitality industry, with rates up 5 percent to 10 percent on average, depending on the location and loss history. Properties in the most cat-prone areas are facing challenges securing property coverage.

Coverage Considerations

Given this rate environment, agents and brokers writing clubs accounts should evaluate coverage from multiple markets to make sure their accounts are getting the most for their money. Most importantly, don’t allow accounts to give up essential property coverages:

• Full tee-to-green coverage with limits of $1 million to $2.5 million, including all playing surfaces with wind peril.
• Property coverage for business interruption with unlimited extended indemnity.
• Agreed value for building and personal property.

For coastal and other high-hazard property exposures, look for a property-catastrophe product with adequate property limits, access to inland marine coverage, and necessary flood, wind and earthquake coverage.

Risk Management is Key

You can’t prevent a severe windstorm or hail storm from hitting a club, but owners should have an effective risk management program to protect assets, be proactive in preventing claims and be prepared to reduce the impact. Remember, losses affect an account’s risk profile and premiums over a three- to five-year period.

When it comes to tree damage, clubs can take to improve their outcomes:

• Try to limit claims submission to what’s needed. For example, if a club loses 100 trees but 50 are in an unmaintained, wooded area away from the course, only file claims for ones that will be replaced.
• Use professionals to handle regular tree pruning and removal of dead branches. This will help to make sure trees are not too tall or top-heavy.
• Evaluate windstorm risk to buildings and, if necessary, add storm shutters or tempered glass to withstand flying objects.

Emergency response planning is critical to a club’s ability to respond to a severe weather event. Clubs should do a vulnerability analysis to evaluate potential threats, and then prepare a business continuity plan that can be implemented during and in the immediate aftermath of a disaster. This plan should have a list of emergency contacts, crisis procedures and communications, alternate vendors and suppliers, and the steps to recovery. It also should have information on employees and necessary passwords and codes for technology – everything needed to reopen quickly and safely.

Also consider a back-up generator. As many clubs and other businesses learned after Sandy, losing power can result in additional losses, such as food spoilage.

The past two years have taught us that we cannot fully predict weather. Too many clubs never reopen after storms, so don’t let your club accounts wait until their greens are filled with downed trees and power is out to begin addressing this risk. Make sure they are equipped with the coverage they need, as well as risk management and emergency response plans to mitigate the impact.

Topics Catastrophe Windstorm Property Risk Management