About the time NAPSLO 2014 begins, Atlantic City's newest luxury casino, "Revel," will close its doors after only two years in operation (including two bankruptcies in that time).  It's yet another major loss for Atlantic City, which depends on the casino industry for a full 70% of its tax revenue.  In August, Moody's cut the rating for the city's $245M in general obligations to junk, and Atlantic City's already high 13.1% unemployment rate will increase further with the loss of an estimated 3,100 Revel jobs.  There is also a huge potential loss for the lenders, who thought it was a good idea to invest $2.4B – $2.6B to build the state-of-the-art-facility, not to for mention New Jersey taxpayers (see: me) who pledged $261M in tax incentives to hasten Revel's completion.  Clearly, some smart people seem to have been worried about the wrong things when planning this failed casino.

Are we, as an industry, worrying about the right things? Of all the risks to which Revel was exposed, its backers at least had the luxury of knowing that risk inside the house, at the tables, was a lock.  They knew that math would guarantee they'd win, if they got gamers to play.  E&S markets, however, are exposed to both external factors and the risk inside the house. Carriers should be so lucky as to have the certainty that Revel had: guaranteed underwriting profit, if only enough bets are made.

Reasons for Revel's quick and total loss reportedly include self-induced hurdles, like a poor layout and an initial "no-smoking" policy.  External factors included increased competition from NY and PA casinos and from online gaming.  Moreover, Revel's home town had failed to adapt to a changing environment. In Atlantic City, gaming accounts for 78% of casino revenues. Compare that to Las Vegas, which also had a recession-driven decline in gaming revenues but which relies on gaming for only about 34% of revenue.  Relying on entertainment, Las Vegas' overall revenues increased every year since 2010, while Atlantic City's have declined.  Las Vegas dealt with environmental risks and is growing.  Atlantic City tried too late, and appears to have failed with Revel's closing being the latest blow.