Mississippi’s casinos appear poised for a rebound, in part thanks to claims settlements paid the industry ruined by Hurricane Katrina, but one broker wonders if carriers will hedge their bets and hold back future coverage.
In a report issued by Standard & Poor’s today, the New York-based rating service said the casino industry is poised for a strong comeback in Mississippi, with most of the state’s casino’s readying to reopen by the end of this year, and more gaming interests looking to take root in the state.
The state’s gaming industry was centered in Biloxi, with two casinos in Gulfport and one in Bay St. Louis, employing 16,000 workers. S&P said there are only three casinos in operation today, employing 4,600 people, but generating 55 percent of revenues the 12 did before Katrina. The industry generated $1.2 billion in gaming revenue before the hurricane.
S&P said this figure gives the pre-existing casinos a strong incentive to get back into the game as soon as possible.
“We expected rated companies to invest significantly in this market in the next few years,” said Peggy Hebard an associate director for S&P in a statement.
It also helps that the state changed the laws so the casinos, which were confined to barges anchored along the coast, are now built on land.
S&P noted that while many of the casino operators are national corporations able to make the capital investments, they will received help from insurance claims settlements. The report notes that the cost of insurance could be an issue for these companies as they begin operations again.
Speaking to National Underwriter, Ms. Hebard and Mike Scerbo, a director with S&P, said the larger operators should be able to absorb the increased cost for insurance. The fact that three casino’s have opened, and others are planned to soon follow, including single property operators, demonstrates that insurance is available and not unaffordable.
Dana Berry, director of gaming and hospitality for Chicago-based insurance broker Aon, said that changes in the laws mean the casinos, which were swept up by Katrina and destroyed, will now be built to withstand hurricanes, making them a better insurance risk. However, “wind coverage is almost impossible to get,” he said, and those who do secure it find it “painfully expensive.”
While there is no hard numbers available, he said the industry has paid well over a billion dollars in claims to the casinos, with property and content losses settled, with business interruption claims left to be squared away.
“Business interruption claims usually take about a year to settle, just in time for the next season,” he noted with irony.
Casinos transfer risk to the traditional market, he explained, and despite the improved construction to the casinos, insurers remain reluctant about writing coastal risks, especially along the Gulf coast. What the strategy will be for dealing with obtaining coverage, as capacity appears to shrink, remains an ongoing question.
“The situation is not just about price, but just getting the insurance,” he said, adding the situation remains “fluid” with availability changing week to week.
“This is what I lay awake at night’s wondering about,” he said.