Recent headline-making entertainment incidents – such as the death of actor Paul Walker during filming of the movie “Fast & Furious 7,” the collapse of the stage during country music band Sugarland’s concert, and several big event cancellations – have highlighted the potential for high severity claims in the sports and entertainment segment.
Some established players are taking note and reevaluating their offerings to the risk-exposed segment.
“We are seeing a cutback in capacity with carriers that would normally offer $25 million in limits cutting down to $10 million over primary,” says Jerid Schmickle, president of Alive Risk, a division of All Risks. “It is a reduction of risk exposure – they call it limit management.”
The cutbacks in capacity from other markets have benefitted Alive Risk which has a substantial excess facility and, Schmickle says, on the good accounts offering more limits is well worth it. He says the admitted markets that were writing this segment are now sticking to their programs and the “safer risks” in this segment, which has been trending towards “extreme” sports and the expansion of family fun centers into new and riskier activities like go-kart racing, inflatables, and climbing walls. Extreme sports encompass action or adventure type activities like the X Games, military type obstacle courses such as Tough Mudder or motor sports.
Companies insuring this class are determining if the riskier sports and activities are ones they are willing work with.
“In general, I think there is a wariness of putting yourself out there too much,” he says. “Some of the carriers have decided that maybe it isn’t such a great idea… so it comes to the surplus lines market.”
New Players Still Playing
Still, the high-profile and costly claims in the segment haven’t completely sapped capacity. Some new players are coming into the market and certain established ones are expanding their offerings and exposures.
Specialty Insurance Group started writing sports and entertainment risks back in January. The new company, which is a member of Everest Re, was started by sports and entertainment veterans Greg Mosher, former co-founder, CEO and president of K&K Insurance; David Harris, founding partner of sports and entertainment insurance company American Specialty Insurance and Risk Services; and Lowery Robinson, founder of the Specialty Risk Division for American Hole ‘n One/American Media Agency.
The company is focused on professional sports, including major and minor leagues; amateur sports and sports associations; sports and entertainment venues; entertainment including concert promoters and activities; motor sports; and leisure centers such as amusement parks, water parks, mobile amusements, family entertainment centers and special events.
Harris, who serves as senior vice president of SIG, says their background in this class has prepared the young company for success. SIG is taking a risk management-focused approach and designing products specifically for the segments it is involved in, Harris says. SIG is also different because most of the capacity in the market currently is for the “plain vanilla” part of the segment, he says, not the more extreme sports and events side that they plan to also target.
“There are not a lot of people jumping over tables to write the ‘Tough Mudder’ kinds of risks. These are challenging activities that are relatively new to the industry,” he says. “Much of what you have to do in terms of pricing and how you design the product has to be experienced outside the industry you are considering. That is part of the whole discussion of emerging sports.”
Harris says the excitement of these new risks was part of what lured him out of retirement to start the company.
“This is an exciting, fast-paced business and an evolving business. People want to go faster and be more challenged in sports so you have to be on your toes…and there is a certain excitement with that,” he says.
Claims management is also a differentiator for SIG. SIG has an enhancement to its general liability policy that provides a crisis response provision along with public relations services.
“Specialty coverages require specialty claims handling…[these clients] can’t be waiting 60 days on the adjustment of a claim so a quick response is a very vital part of what we do,” he says.
SIG also has a pyrotechnic unit for retailers and display companies. The company plans to expand into movie/entertainment probably in early 2015.
The market seems to be responding to the company so far, as Harris reports the firm has already written its 1,000th policy.
Harris attributes the early success to clients looking for a relationship and a strategic partner. “Knowledge is probably the biggest barrier-to-entry in this market and having the experience to understand all of these different [risks]. The experience of the core group of senior officers in this company makes up for a tremendous amount of that, as does being owned by such a well-respected insurance organization, Everest Re,” says Harris.
Alive Risk, which was formed in 2011 as a division of NAS Insurance Services, was acquired by All Risks back in June. The wholesale broker has specialized in entertainment, media, special events, film products and sports accounts since it began operations. Schmickle says the transition to part of All Risks National Specialty Programs department has been very smooth, with the biggest difference now being that distribution is solely towards retailers. Agents have to be appointed to work with them.
Alive Risk is an appointed underwriter for Lloyd’s and is also brokering business with ProSight Specialty, which has allowed it to enter the motorsports segment and grow this business. It is also doing reinsurance business in the entertainment, media, sports and hospitality segments. Schmickle says they have seen steady growth. He expects the firm will be up to 10 employees by the end of the year.
Long-time sports and entertainment player K&K has seen recreational activity centers expand into different activities, which was part of the reason it moved its entertainment center program to a new carrier, Scottsdale. It can now offer higher limits ($25 million) and workers’ compensation as part of its package.
“Everyone wants to grow their business and they are targeting every segment – adult, tweens, children – they are trying to expand into everything to encompass all of those generations,” said Lita Mellow, senior vice president of K&K’s Recreation Division.
Mello says K&K isn’t deterred by additional capacity in the market because so much of that has come and gone in the 30 years she has been with the company. “A lot of competitors feel that [this segment] is easier than it really is. If you are a carrier that is more price-driven than actual underwriting you will get burned,” she says. “The sports, leisure and entertainment segment is not one where you can be the cheapest on the block for a long period of time and not have claims catch up to you.”
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