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OFF BEAT: Aon wraps up an insurance program for Santa


When it comes to protecting his North Pole-based nonprofit manufacturing and global delivery firm, all the Christmas magic in the world wouldn't be able to mitigate Old Saint Nick's real-world business risks.

Based on common knowledge of his operations, executives at Chicago-based Aon Risk Solutions have identified Santa Claus' top 10 liability exposures as a business owner. Not surprisingly, supply chain breakdowns, workplace injuries, illness and employment disputes were among the risks experts said would pose the greatest threat Mr. Claus' organization.

According to Aon, the 10 biggest risks would be:

• Workers compensation

• Valuable paper coverage

• Kidnap and ransom

• Supply chain interruption

• Bedbug contamination

• Employment practices liability

• Reindeer mortality

• Product liability

• Weather risk

• Aviation third-party risk

“I'd have to say supply chain would be the biggest risk,” said Al Tobin, managing director of Aon's property practice, noting that breakdowns in the flow of raw materials for toys and gadgets to Mr. Claus' workshop would be all but assured, given its access-challenged location.

Delivery of the finished products, of course, is another matter altogether. Mr. Tobin said the sheer logistics of satisfying Santa's annual distribution route—approximately 2.1 billion recipients, a single courier and delivery vehicle and roughly 24 hours in which to complete the assignment—would pose a staggering level of risk exposure across several fields.

Damage resulting from in-flight collisions or crash landings, as well as accidental contamination of a third-party residence with bedbugs or other harmful species, would be coverable under aviation and general liability insurance. Additionally, experts said Mr. Claus also should consider some form of travelers' coverage to protect against kidnap and ransom threats.

“That's the biggest challenge, is the delivery to and from the North Pole,” said Tony DeFelice, managing director of Aon Risk Solutions' casualty practice. “He's got quite a bit of everything in terms of the risks that are out there.”

If Santa Claus' elfin workforce does indeed spend the entire year churning out billions of gifts, workers compensation claims for onsite injuries, particularly repetitive stress symptoms, more than likely would be a common occurrence, according to Aon.

Considering the size of the workforce, it's probable that Mr. Claus' operation also would experience its fair share of discrimination, harassment and other employment practices liability claims. (There was, of course, the well-documented case of the reindeer fleet's discrimination against Rudolph based on a certain birth abnormality, though it was settled out of court with his eventual promotion.)

Packaging an insurance program for Santa's operation would be a challenge, and an expensive one at that, experts said.

“When you start to add all of these coverages together, and you consider the volume of toys and things going out, it's probably well in excess of $20 million in premium,” Mr. DeFelice said.

However, based on what would appear to be a relatively low number of actual claims over his approximately 190 years in business, Mr. Tobin said Santa likely would be viewed by brokers as “a good risk.”

“It would definitely be an experience-based risk,” Mr. Tobin said. “We know that Santa's had good experience because we haven't seen him pop up on any significant class action suit lists.”

“We'd give him as many credits as we could,” Mr. DeFelice added.