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Outside Magazine July 2002
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Risk (Cont.)

Illustration by Dan Winters and Gary Tanhauser
TIMES ARE TOUGH AGAIN. New York-based Frontier Insurance Company, known for its affordable outdoor liability coverage, was declared insolvent last October by the Superintendent of Insurance for New York State. TIG Insurance Group, another liability player based in Irving, Texas, has pulled back from the outdoor market almost entirely. (Asked to elaborate, a spokesperson for TIG would only say that the company is "currently changing the way we distribute our line.") Many other insurers who jumped into the adventure biz when times were good are now running for cover. "Up to 70 percent of the carriers once involved in outdoor recreation coverage are either no longer involved in it or are reducing their exposure," says one insurance executive who asked not to be named, but whose company focuses primarily on the outdoor industry.

The result? Escalating prices for coverage, when it's available at all. "If you've got an impeccable record, you can anticipate 15 to 30 percent increases in the coming year," says Michael Smith, a former vice-president of Marsh USA, the world's largest insurance broker. "There are clients who will see 100 percent increases or could be dropped outright."

Ask around, and you quickly find that both small outfitters and big-time guide services are feeling the pinch. Guides are reluctant to talk about insurance on the record, especially since so many operate on notoriously thin profit margins. But those willing to discuss the issue say it's been a brutal year for their bottom line. One independent rock-climbing guide in the Adirondacks recently saw his annual liability premium jump from $1,500 to $2,800. Garrison, New York-based Outward Bound USA, which guides more than 30,000 clients every year, just got hit with a 30 percent hike.

Jim Murton, who's run the Bingham, Maine-based rafting company North Country Rivers for 20 years, says he's also riding out a 30 percent bump in liability insurance this year. "I saw it coming last fall, but I didn't think it would be this bad," says Murton. "With our experience and safety record, I normally have some leverage to negotiate. But there was zero negotiating this year."

Another symbol of these rough times is the hard-luck case of Charlemont, Massachusetts-based Zoar Outdoor, one of the East Coast's biggest river-rafting, kayaking, and rock-climbing outfitters. When its original underwriter, Frontier Insurance, went bust, Zoar switched to TIG Insurance, only to have TIG downrated to such a degree that Zoar had to find another provider. Ultimately, Zoar's insurance bill went from $17,000 in 2000 to $27,000 in 2001, and company president Bruce Lessels expects another 25 percent rise this year.

Such costs will eventually trickle down to consumers as a price hike, but for many outfitters it's too late to adjust this season's rates. "We committed to our pricing for 2002 back in November," says North Country Rivers owner Murton. "Some outfitters may go with insurance add-ons, but we'll just eat the increase this year."

Beyond the financial squeeze, a few insurers are rewriting the rules, excluding employees and activities that they've covered for years. "The exclusions are starting to get a little overwhelming," says Jared Hopkinson, owner of Sawtooth Adventure Company, a Stanley, Idaho-based rafting, kayaking, and guide service. "This year our insurance company didn't want anybody under 25 driving our vehicles. Well, this is an industry where a lot of guides are in their twenties. It's making it more difficult for us to do business."

Is it possible to operate without insurance? Negative, say adventure-company owners. Most guide services in the West operate on federal land, and the U.S. Forest Service and National Park Service won't let anyone make a dime without adequate coverage. Those in the East often deal with private landowners and public utilities whose rules are just as strict. No policy, no play.

In the months ahead, more outfitters will be hit with sticker shock as their insurance policies come up for renewal. As exorbitant premiums eat into their revenues, prices will rise, customers may rethink those big trips they were planning, and the adventure industry will hit a few more bumps on the road to economic recovery. But the insurance crisis won't cripple the industry—as long as insurers aren't suddenly tripped up by a big-ticket liability judgment. One for, say, $10 million.




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