Unconfirmed reports have been circulating that Santa's insurancecoverage is in danger of being seriously curtailed or evencancelled, putting delivery of toys for Christmas 2006 injeopardy.

An anonymous insurance industry source explained that Santa'saccount presents major underwriting challenges, including thefollowing:

o Santa's North Pole home and workshop are in a very rural area,and fire protection is not adequate for the exposure. The home andshop combined are roughly 12,000 square feet (made entirely of ice)and does not contain a sprinkler system. The property is adjacentto a large body of water, increasing exposure to loss as a resultof windstorm. Icy conditions also lend themselves to slip-and-fallexposures.

o Santa has a serious commercial auto problem. On his worldwideexcursion once a year, Santa has been known to drop unsecuredmaterial from the back of his vehicle, potentially causing damageto homes and other property. Santa is getting on in years, andthere is some concern his driving skills havedeteriorated–especially in snowy conditions. Santa has also beenspotted riding without a seat belt, and due to lack of a credithistory, his “score” is ineligible.

o Santa's workers' compensation program is also a seriousconcern. Many of Santa's elves work in roles that requirerepetitive motion, creating a carpal tunnel exposure. Santa isprone to OSHA compliance problems as his workplace is a bitoutdated, and his employees work around-the-clock everyDecember.

o Santa's general liability may be his biggest problem. It seemsthe workload has gotten so great that Santa has begun usingsubcontractor manufacturers to help meet the demand for toys aroundthe world. He also reportedly lacks product liability, errors andomissions, and employment practices liability coverage.

o Santa lacks key man life insurance. So far he has beenunsuccessful in finding an affordable policy, as he is overweightand rather old.

o Santa has been shopping his health insurance for years, butfew will write such a small group, rates are soaring, and there areno in-network doctors at the North Pole.

Santa and his independent agent met last week to discussoptions, with Christmas Eve looming. The agent explained he hadsent submissions to all of his standard markets and severalwholesalers–noting that on the plus side, loss runs for the past100 years are all perfectly clean.

The agent told Santa he was sure he could obtain quotes for him,but the cost would go up quite a bit, coverage would be morerestrictive, and the carriers might not be as well known.

For the longer term, however, the agent had a number of riskmanagement suggestions for Santa to help make his account moremarketable.

o Hire a full-time risk manager, or at least allow his agent toconduct a loss control and safety survey of Santa's home andworkshop.

o Put together an employee manual and provide instructional DVDsto all supervisors and elves to avoid EPLI claims.

o Expand his in-house manufacturing operation to eliminate theuse of subcontractors and control his liabilities.

o Consider self-insuring some hard-to-place risks in a captive.Bermuda was dismissed as too warm, but Vermont would beacceptable.

o Continue lobbying legislators to create a special federalreinsurance program just for Santa's exposures. (Unfortunately,passage this year is unlikely, as Republicans believe the privatemarket should handle the problem without a government bailout,while Democrats see any such move as a violation of theConstitution's church-state separation.)

In the short-term, Santa is optimistic he will make his gift rundespite any insurance woes, with officials from major toymakers andgreeting card firms offering generous pledges of support if soaringpremiums threaten to sink his nonprofit shop.

In addition, insurers are reportedly wary of cancelling Santa'scoverage for fear of receiving lumps of coal in their stockings–notto mention the bad publicity!

MERRY CHRISTMAS and a HAPPY NEW YEAR to us all!!!