Escalating liability insurance premiums are the most common concern we hear from our customers at Hospitality Insurance Agency. So while there’s not much we can do to make your concerns go away completely, we’d like to help you understand the two major factors driving premiums up in this market so you can adjust your expectations for your next renewal.

Factor 1:
In December 2011, a major carrier that insures close to 40% of the marketplace decided to exit certain portions of the market. This carrier cited a deterioration in the profitability of the hospitality segment as their reason for leaving the market. This carrier declared the following:

That effective immediately for new business, and effective April 1, 2012 for renewal business (there will be NO “grandfathering” of current risks), they do not wish to insure the following types of business:
• Venues with liquor receipts > 75% of total receipts
• Risks who have filed bankruptcy in the past five (5) years
• Insured whose primary business is a “nightclub” (including Gentlemen’s Clubs and Fraternal Clubs)
• Insureds employing bouncers or security
• Insureds allowing patrons under the age of 21
• Insureds with “mosh” pits or pyrotechnics
• Insureds with a mechanical bull or other riding devices
• Insureds with ANY prior Liquor Liability loss
• Insureds with ANY prior A&B loss
• Insureds with any License revocations or citations

The carrier did cite that they understand that this will put their current hospitality insureds in a difficult position in having to replace coverage but they felt they had no choice based upon the huge amount of liability claims paid out for Assault & Battery, Liquor Liability and Slip & Fall losses that they have incurred.

Factor 2:
The other major carriers in the market, also experiencing these same high levels of claims, have begun to increase premiums across the board to recoup these against these losses. Now once again I hear you: ”We haven’t had any losses at all!” However, the actuarial formulas used by all of the carriers pool together all of the risks in the hospitality marketplace, and they are using that as the basis for their across-the-board rate increases.

Summary:
In summary, the two factors cited above are creating what is called a “hard market.” Pricing is firm and going higher. The market has hardened, and we are warning all of our insureds to expect increases at renewal on their Liability premiums. Zero deductibles are being phased out and replaced with $5,000 minimum deductibles, and the carriers are placing sub-limits on the Assault & Battery (A&B) liabilities as well. If your business has not had prior claims, then there should not be a serious problem obtaining $1MM A&B cover limits at renewals. However, if you have had claims, carriers are moving A&B Limits down to $100k-$300k with $5k-$10k deductibles. As the insurance experts in the hospitality industry, we want to share our forecast for the weather ahead over the next two years: STORMY.

The insurance experts at Hospitality Insurance Agency on your side, and we will continually strive to provide you with the most comprehensive coverages for your premium dollars. If there’s anything we can do to help you better understand Liability premiums or if there are any other concerns you’d like to discuss, please call Pike at 1-800-940-9387 or check out our website at www.HospitalityIA.com.

Next month we plan to bring you the top five actions that you as a hospitality business owner can take to mitigate risks, decrease claims and losses, and, consequently, decrease your insurance premiums.

Until next month,

Pike Barber
Hospitality Insurance Agency