Specialty Lines Markets

"Pay for play" market softens

More choices for businesses catering to active recreation enthusiasts

By Phil Zinkewicz

A softening insurance market, new entrants coming into the business and a quest on the part of insurers for new premium dollars to replace the premium dollars flowing out of the market as rates drop are all current conditions that dominate recreational business insurance, according to experts in the field.

“We have seen softening in the specialty sports and leisure market, although I don’t believe to the degree that the standard commercial property and casualty market has seen softening,” says Matt Sackett, president of Leisure/Sports Specialists, LLC (LSS), of Fort Wayne, Indiana.

LSS opened its doors for business in April 2005 and, according to Sackett, is staffed by individuals with more than 60 years of combined experience specific to sports and leisure liability. Distributing its products through retail and wholesale agents nationwide, LSS focuses on amateur sports and motor sports sanctioning bodies and events.

LSS also considers professional sports at the minor league level, including baseball, softball, basketball, volleyball, football, soccer, tennis, track and field and gymnastics. In addition, LSS also specializes in horse tracks, family entertainment centers, amusement parks and, to a lesser extent, water park operations.

“As the market softens, we see an influx of ‘new’ entrants into the sports and leisure industry,” says Sackett. “Typically, many of these are short-lived as they do not realize the depth of specialization and experience that is needed to understand the risks within these industries. As the sports and leisure industries traditionally soften later and harden earlier than more Main Street commercial exposures, many new players are often trying to deploy capital into these industries temporarily as they perceive more stability in rates.”

As for trends in the business, Sackett says there are several that are noteworthy but have yet to “play out” in the sports and leisure industries. “First is a federal push for amusement ride regulation on a national level. This would create far-reaching issues for operators within the amusement industry. With regard to sports and motor sports, we continue to see waivers challenged on a case-by-case, state-by-state basis. The rejection of waivers as a valid defense for risk assumed by an athletic participant can trigger many significant and negative reactions by specialty providers of sports insurance,” says Sackett.

David Hatlem, executive vice president, club programs, for New Jersey-based Bollinger, Inc., one of the nation’s largest privately owned insurance agencies, calls the sports and leisure market “overserved,” as new carriers continue to enter the field. Bollinger specializes in golf clubs and golf-related businesses.

“There is a wide range of carriers coming into the business, everybody from small regionals to the large multinationals,” says Hatlem. “Each carrier has its own coverage. Some are unique and some are standard business plans. Premiums are on the downside, while offerings are going up.”

Most people believe that the most dangerous aspects of playing golf are the usual slip and falls or getting hit with a golf ball. But Sackett says that many golf clubs have swimming pools to serve family members who are not playing golf, adding several new exposures. “Management has to oversee these swimming pools. Golf clubs also need liquor liability and coverage for pollution exposures because of the herbicides and pesticides used on the foliage. Also, many golf clubs have underground storage tanks,” says Hatlem.

Moreover, Hatlem says that golf clubs today are becoming more family friendly, adding more exposures. “Clubs today are under pressure fiscally. Some clubs don’t have full membership, so they offer extras such as day camps for kids and child care facilities. Some golf clubs offer health care clubs as a way of increasing membership fees.”

Michael Dean, vice president of the Chicago-based Francis L. Dean & Associates, agrees with his colleagues who emphasize today’s soft market conditions. His firm specializes in amateur sporting events, and they insure other events such as weddings and festivals.

“I know I’m belaboring the obvious, but the market is really soft in our areas. People are buying and selling aggressively, and there really is an excess of competition. Moreover, in recent years I have seen more willingness on the [part of] the buyer to buy direct from the carrier using the Internet. Part of the reason is that the children of the Baby Boomers are coming into the marketplace and they are more facile with handling computers and different programs.”

T.H.E. Insurance Company is a niche market underwriter, and one of its subsidiaries, Allied Specialty Insurance, targets the entertainment industry as one of its niches. Rick D’Aprile is president of Allied. Among Allied’s entertainment niches, he says, are programs for amusement centers, amusement rides, arcades, batting cages, bowling centers, go-karts, ice skating rinks, laser tag, miniature golf, paintball, play centers and water slides.

Coverages include general liability, property, business income, inland marine, automobile, crime, liquor liability and excess liability. “Each of our niches comes with particular exposures. New entrants coming into the business may not be aware of the exposures they face, and that’s dangerous for them and for their clients. Based on our years of experience, we are fully aware of those exposures and steps that should be taken to reduce those exposures,” says D’Aprile.

All those interviewed agreed that, with the competitive market so intense, caveat emptor should be the words of the day. *