No Softening Likely For Whitewater RisksFew insurers are game to cover river adventures, andpremiums keep rising

With the waning chill of winter receding into memory for anotherseason, vacationers and hobbyists are beginning to look forward toanother summer that inevitably brings thousands of enthusiasts intouch with the great outdoors.

Each season, vacationers visit the millions of acres ofnational, state and local parks throughout the country. Accordingto figures from the National Park Service, more than 266 millionpeople visited the National Parks system in 2003. Campers, hikersand paddlers look to the wilderness to escape the mundane andmaybe find a little adventure during the spring and summer.

For some vacationers, the experience may be a slow trip along alazy river by canoe. For others, it is the excitement of plungingthrough an icy gorge along the Colorado River, ripping throughwhitewater rapids that appear to tower overhead and throw a paddlerabout like a rubber ball.

Catering to these enthusiasts is an industry of guides,outfitters and renters who supply rafts, kayaks and canoes forthose nature lovers. For a few months a year, professional guidesand outfitters provide the equipment and apply their uniqueknowledge to give vacationers memorable adventures along therivers. It is the knowledge of guides and outfittersand riskmanagement practicesthat keep these activities safe for mostparticipants.

However, like other small businesses, those in the paddlerindustry are faced with insurance challenges. What makes thisexposure unique is that it is a seasonal business with what areperceived to be tremendous risks in some activities that make manyinsurers wary.

“This is an industry that does a lot toward risk management,”said Jim Sattler, an owner of Sattler Insurance Agency, anindependent agency in Lewiston, Idaho. “They are highlyprofessional.”

While his agency deals in all lines of insurance, Mr. Sattler isone of only a few agentsless than a dozen throughout thecountrywith the experience and expertise in writing recreationalrisks, including whitewater rafting trips.

Back in 1979, when he became involved in recreational risk toprovide coverage locally for whitewater outfitters, guides and jetboats, there were not a lot of players in the market. SattlerInsurance developed a relationship with Albany Insurance Companyfor about 13 years and provided programs for whitewater outfittersand guides.

The program today is national but no longer with Albany, whichwas purchased by another carrier in 1997 that did not want theriska familiar story for this line.

That same year, the agency introduced “River-Pak,” a broadgeneral liability program allowing outfitters to put inland marinerisks onto the plan to cover equipment. The program was withFrontier Insurance.

“It was a very good program,” noted Mr. Sattler. “It was thelead in the industry for a couple of years, as far as thecoverages.”

While his agency dominated the recreational market west of theMississippi, in the East the main agency was BGS&Gwhicheventually was acquired by CBIZ Insurance Services, which continueswith a presence in the market today.

In 2000, Frontier went into rehabilitation, and again therecreation industry Mr. Sattler represented had to look for a newcarrier. This time, his agency ended up working with K&KInsurance, a managing general underwriter based in Fort Wayne,Ind.

The saga of changing carriers and limited markets has notchanged. During the soft market of the 1990s, there were 17 marketsavailable for all recreational classes, said Mr. Sattler. Today,there are possibly sevenand only three of those markets handle thebig river, whitewater risks, he noted.

Mike Fetchero, senior vice president with CBIZ InsuranceServices in Cumberland, Md., said that although the generalcommercial insurance market is softening, recreation accounts withdecent loss history are still seeing increases from 5-to-8 percent.Capacity is not an issue, with such carriers as Lexington Insurance(a unit of American International Group), Tudor (a member ofWestern World Insurance Group in Franklin Lakes, N.J.), and evenaccess to Lloyd's available, he noted.

“It's a little harder than the rest of the market,” he said.

Since it is a small class, any serious loss activity can affectthe business, and some of the loss experience “has not been sogreat.”

“A lot can happen on a trip dealing with nature,” said Mr.Fetchero. “A river, by itself, can be unpredictable. There are alsoconcerns with individuals health. You only have to have a handfulof serious injuries to use up the premium.”

Lita Mello, business unit leader with K&K, said that from anunderwriting standpoint, risks are written on a case-by-case basis.An outfitter may do more than just rent watercraft or provide aguide. Some have retail businesses, camping excursions andrestaurants to round out their business, but it is the waterclassification that drives the risk.

Whitewater is classified in classes from “1″ to “5,” with “Class1″ for the calmest rivers and “Class 5″ for the roughest rapids. Insome casesrarelycan the classification go up to “6,” which could beconsidered treacherous or most challenging to paddlers.

To control the exposures, there are two important stepsoutfitters take from a risk management perspective, according toMs. Mello. One is training and knowledge of the river, she noted.There is often some form of training for the vacationing paddlersbefore entering the water to ensure they have an understanding ofwhat they are getting into.

“The larger outfitters are more sensitive to risk management,”she said. “They work to lower the possibility of a claim. They haveto be cognizant of the risk they have.”

The other important aspect of risk management is thewaiver/release agreement that paddlers sign before going onto theriver. “[This] is an important part of this program,” she said. “Inthis class of business, there is always the possibility ofaccidental injuries, particularly when there are exposures to Class4 and 5 rapids.”

“There are some fantastic professionals out there, butfatalities can occur,” warned Mr. Sattler. “The shock-lossreverberates through the entire industry.”

Ms. Mello noted that premiums today range from a minimum of$2,000 on general liability, with average premiums of around$7,000. Coverage is written on a surplus lines basis throughLexington.

Deductibles can range from zero to $5,000, per claim, noted Mr.Sattler. Limits vary from risk to risk.

However, auto and property is available in the admitted market,said Mr. Fetchero, at least in the East.

One of the few others in this line is Gillingham &Associates Inc., based in Westminister, Colo. Glenn Sudol,president of the managing general agency, runs a national programthat covers guides, outfitters, lodges for hunting and fishing, andcampgroundsbut it limits the exposure.

“Our market is not thrill seeking,” he said. Their river riskscover the scenic float tripsno higher than Class 3 rapids. Theywill go as far as to cover fishing excursions that require portageover rivers, but not if the trip involves rapids.

Even with this limited risk-taking, the firm recently had tofind a new carrier after Gulf Insurance (a unit of St. PaulTravelers) pulled out. The program is now with Arch InsuranceGroup.

“We have a good product and competitive pricing for what we do,”according to Mr. Sudol. “Our knowledge of these accounts fortifiesour position and helps with stability” in the market.

Reproduced from National Underwriter Edition, March 17, 2005.Copyright 2005 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.