During the summer months, you can see them popping upeverywhere—on fairgrounds, in parking lots and wherever a crowdwill converge. Traveling carnivals are as much a part of summer asswimming pools, picnics and block parties.

As Summer 2014 draws to a close–and as the fall festival seasongears up–we take a closer look at traveling carnivals from aninsurance perspective. Drew Tewksbury, senior vice president anddirector of amusements for Cleveland-based brokerBritton Gallagher,has specialized in the niche for almost 20 years. Here he discussesthe carnival industry and what's involved in insuring it.

Fact: It's a recession-proof business.

The recession has had very little impact on traveling carnivals,which actually performed quite well during the worst years in spiteof rising fuel costs, Tewksbury says. People hit by financial hardtimes tend to spend their dollars locally at traveling carnivalsrather than large, expensive theme parks.

The industry is more susceptible to variations in the weatherthan the economy, with weather being the most significant factor inthe growth or contraction of the business. “If it is a bad-weathersummer, then the traveling shows will suffer,” he says.

Fact: It's a flat industry facing perpetuationissues.

Although traveling carnivals may seem ubiquitous during thesummer months, as an industry, growth is flat, Tewksbury says.“The cost of equipment, fuel and resources has escalated to thepoint that for the cost of one spectacular ride today, you couldhave acquired an entire carnival operation in the 1970s,” he says.As a result, industry growth has remained stagnant over the past 10years.

Like most other small family-run businesses, traveling carnivalsalso suffer from a generational lack of interest in continuing thelong standing family business, he says. “While many third- andfourth-generation showmen are active in the industry, some youngerfamily members are looking to other forms of employment.”

Lastly, with the increased cost of operating a carnival andacquiring equipment, financing has become much tighter, whichfurther restricts the industry's growth.

However, “This industry is a proud, private and professionalgroup of business owners,” he adds.

Fact: Insurance is not hard to obtain.

Several niche insurers find a profitable specialty in travelingcarnivals, including EverestRe via Britton Gallagher, ACE Westchester via Haas & Wilkerson Insurance, T.H.E.via Allied Specialty Insurance, and Lloyds of London via The KaliffAgency.

A typical traveling carnival will have about 20 rides orattractions. They will have a small fleet of tractor trailers,vans and trucks and private passenger vehicles. Standard $1million limits with various aggregate limits are customary, andappropriate coverage is tailored to the specific needs of thecompany.

Like most other businesses, carnivals need general liability,property and workers' compensation, but their mobile nature andunique equipment also requires inland marine, cargo, commercialauto and excess/umbrella.

Premiums are priced through specialized individual underwriting,and no rating matrix applies. “Risks have to be pricedindividually based on exposures and loss history,”Tewksbury says.

Although rides are typically the biggest element to insure,exposures vary from show to show and can include game booth andfood vendor trucks.

Fact: The claims are not as wacky as you'dthink.

Although carnival business can be “marginally” profitable forinsurers, it all depends on the year, Tewksbury says.Industry-wide loss ratios typically hover around the 60% to 65%range. Because of the nature of the business, frequency is less ofan issue than severity. “Insuring the traveling carnival businessis a specialty area that requires specialty underwriting,experienced loss control and claim management in order for it tomake business sense.”

Although most carnival claims are generated by general liabilityand commercial auto, Tewksbury says that claim activity is “verydifferent and less interesting than one would expect.” Most claimactivity comes from pinched fingers, trips and slips on the midway,and when loading and unloading patrons from rides, Tewksburysays.

This is due to the fact that the industry is keenly focused onboth patron and employee safety. “The last thing a carnival wantsis to have unhappy and injured customers. By and large, they spendsignificant time and resources as an industry to make certain theirmidways and rides are both safe and enjoyable for thepublic.”