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With summer in full swing, seasonal businesses such as resorts and theme parks face heightened exposures, but the variety of risks the facilities face across the year require a specialized approach to risk management, experts say.
Keeping underwriters and brokers informed of risk profiles and training for seasonal employees are significant concerns for seasonal businesses, they say.
Tailoring insurance programs to provide property and liability coverage that covers the busiest periods also is key, they say, and can be achieved through risk transfer mechanisms such as parametric coverage.
“It’s critical for these types of operations to have an underwriter that completely understands the uniqueness of their operation and really grasps all the different aspects of the business,” said Dallas-based Evan Simmons, senior vice president and regional property/casualty leader for USI Insurance Services LLC.
“I’ve got to be really proactive. I’ve got to put together a statement of values that is very sophisticated,” said Dave Harman, area vice president, Arthur J. Gallagher Risk Management Services Inc., a unit of Arthur J. Gallagher & Co. in Bellevue, Washington. “If I can give the underwriter more information than he ever thought he’d get,” this helps remove uncertainties in the writing and pricing of the coverage.
Properly training the swell of seasonal employees can be a challenge.
“Seasonal businesses must be prepared to train employees around all the important emergency and incident procedures as well as making sure they communicate with those employees, including making sure they have crisis communications that can be quickly executed,” said Jack Holt, risk control consulting director for business resiliency at CNA Financial Corp. in Chicago.
While business volume may vary between vacation seasons and other months for seasonal businesses, insurance is still largely bought on an annual basis.
“Overall values will remain the same and be consistent throughout the year,” Mr. Simmons said.
“There’s still some exposures that remain in the off-season,” said Calvin Sugiyama, risk service specialist for Allianz Global Corporate & Specialty SE in Portland, Oregon. “You still have to protect the building year-round. That space is still someone’s responsibility.”
There are, however, some variations.
A jewelry shop in a casino, for example, could place primary and excess coverage for its inventory, but the excess limits can vary depending on the time of year, Mr.
Simmons said. A policyholder can buy $5 million primary coverage, “and then it will start to ramp up at certain periods and it’s understood through the policy and the underwriting that it will go to $25 million one month and then $35 million the next, cap at $50 million for the peak periods and then drop back off,” he said.
Trov Insurance Solutions LLC offers “on-demand insurance” mainly for personal lines risks for “microdurations,” according to a San Diego-based Trov spokeswoman.
For example, if a traveler wants to insure a camera during a specific trip, he or she could access the Trov app and secure coverage for any duration, the spokeswoman said. Trov has also expanded its operations and provides insurance for sectors such as ride-sharing, with Waymo and Groupe PSA as partners, she added.
Waymo LLC, a subsidiary of Alphabet Inc., is a self-driving technology development company. It originated as a project of Google before it became a stand-alone subsidiary in December 2016. Groupe PSA is a French multinational manufacturer of automobiles and motorcycles sold under the Peugeot, Citroën, DS, Opel and Vauxhall brands and the second-largest car manufacturer in Europe.
Business interruption insurance can be a key consideration for seasonal businesses to mitigate against lost periods of operation during peak periods, sources said.
“I see contingent business interruption as being a very critical component of the property coverage,” Mr. Simmons said.
“Something really important that I think a lot of business resiliency professionals don’t understand is something called extra expense,” he said, which can be part of business interruption coverage and helps mitigate costs associated with resuming operations, such as temporary building space after a loss.
Business interruption coverage can be extended to cover business income lost due to negative publicity; coverage can be extended to help manage the crisis. For example, if a policyholder has “an event that generates media attention,” such as a resort where a shark bite occurs, lost income and reputational coverage can be secured together with crisis management services, possibly in partnership with a public relations firm, and does not require a physical damage trigger, Mr. Sugiyama said.
Parametric, or index-based coverages, are another tool seasonal businesses can use to transfer risk, said Mr. Harman.
A one-day or weeklong event such as a concert at a theme park can secure coverage for business lost due to bad weather or other interruption, with the trigger linked to an index such as rainfall or temperature.
Parametric coverage can be used “as an additional layer in the tower,” Mr. Simmons said. “This coverage will kick in simply as a result of that weather event.” Mr. Harman said he has seen interest in a product using an “airborne particulate matter” index as a trigger connected to the closing of some amusement attractions due to smoke from wildfires.
Preparing for named windstorms and making sure Florida projects have hurricane insurance during the hurricane season is important to the construction industry, said Doug Ware, vice president of risk management in Boston for Suffolk Construction Co. Inc., a national contractor.
While businesses with seasonal operations may face heightened challenges during busy months, the off-season can provide needed time for maintenance and repairs as well as planning for the next period of operations.