Insurance: A Perfect Storm
What’s going on? The insurance business is being battered by a perfect storm of financial forces. First, insurance rates dropped to unsustainable levels during the 1990s, and a market correction is underway. Premiums dropped by more than half from 1990 to 2000, subsidized by the high rates of return insurers were making from premiums they had invested, primarily in the stock market. Premiums fell even as claims payouts rose. The insurance market of the 1990s was a fool’s paradise. Since 2000, though, the insurance companies have been rocked like everyone else by the market’s plunge. So long, market subsidy. And third, insurance losses due to 9/11 have compounded the cash shortage brought on by the stock market losses. Stock losses have also weakened the position of some reinsurers, making carriers more cautious about selling policies in the reinsurance market.
For all that, the current situation is far less severe than the crunch of the late 1980s, when rates skyrocketed and insurance capacity was strained to the limit. Stock market losses following the crash of 1987 and higher settlement costs in the wake of Sunday v. Stratton, which overturned the assumption of risk doctrine, sent resort premiums from one percent of revenues in 1978 to as high as 15 percent in 1991. The situation incited near riots at National Ski Areas Association (NSAA) conventions.
This time around, there is plenty of capacity for resorts to obtain insurance, and limits are not shrinking across the board. However, every policy is being scrutinized on an individual basis even more so than in the past, and it will be difficult to get blanket coverage on property. In the post-9/11 world, insurers see liability in groups and gathering places, not just in individual workers’ comp or life insurance claims.
Throwing the Book at Ski Corporations
Are modern mountain resorts evil? Hal Clifford sure thinks so. Early in “Downhill Slide: Why the Corporate Ski Industry is Bad for Skiing, Ski Towns, and the Environment” (Sierra Club Books, due out in October), Clifford says his goal is to “open a public debate about the relationship between the skiing business and the environment and communities upon which it depends.”
However, accusing the major ski companies and the Forest Service of engaging in “an ongoing exercise of government and corporate hypocrisy” that is destroying the alpine lifestyle may not be the best way to open a dialogue. The book skewers Intrawest, Vail Resorts and American Skiing Company for destroying all that was good about skiing and mountain life. And it rails against the duplicitous decisions of Forest Service bigwigs in Washington for abetting this destruction.
Some of the criticisms have a ring of truth. Ski towns are far from perfect; they display some of the problems afflicting urban and suburban America, as well as a few that are unique to mountain resort towns. But Clifford repeatedly takes his criticism too far, as when he lays blame for the Mexican-American “border war” at the feet of the ski industry. This book contains far too many such absurd exaggerations to even create a debate.
FIS Joins the 21st Century
The FIS, the august body that governs ski (and more recently, snowboard) competition, has always moved at a glacial pace. Which makes this summer’s flurry of activity all the more remarkable.
First, the FIS has radically changed its delegate group, replacing many of the members of the FIS Council governing body with new representatives, drawn largely from their respective national governing bodies. As part of this revolution, Hank Tauber, the U.S. council member for the past 14 years, stepped down in favor of Bill Marolt, the current president of the U.S. Ski and Snowboard Association (USSA).
But that was only the beginning. The FIS has added a new event, the knockout slalom, and made changes to the running order selection system for super G and downhill. The knockout uses a modified pro-style dual format to pare the field to the top nine, who make one last run in which the fastest skier wins. It’s intended to make a good hour-long TV package, and it’s suited to live broadcast as a night-racing event (in Europe, anyway). Men and women will each have one knockout this coming season, in Europe; the format will expand to the U.S. in the 2003-04 season.
In the new downhill and super G format, the final training run will be used to seed the running order, where the top 30 qualifiers start in reverse order. The move is intended to maintain spectator interest for more of the race; typically, speed event winners have had start numbers 7, 8 and 9, making other racers irrelevant.
And finally, FIS will add skiercross and ski halfpipe to the FIS freestyle championships in 2005, and is scrambling—yes, scrambling—to add such events to the freestyle calendar for the coming season.
Monster Breakthrough
This could be big, really big. On the heels of the USST’s decision to incorporate Jack Turner’s Snow Monsters skier and rider development program into all major USST events, Vail Resorts has committed to the program in a big way. All five resorts (Vail, Breckenridge, Keystone, Beaver Creek and Heavenly) will showcase the characters and related skier-development materials. The Vail areas join several others, from Willamette Pass, Ore., to Crystal Mountain, Mich., and Jay Peak, Vt. At press time, the Vermont Ski Areas Association was on the verge of completing a deal for varying levels of involvement for all member areas, and other state associations were considering similar moves. With TV time at USST events and wide exposure at areas large and small, Snow Monsters looks like a truly national kid’s program.
No More Whining About 9/11
As refreshing as it is to hear the insurance industry blame something other than 9/11 for its current woes, here’s something even more shocking: the ski business did as well as it did last winter because of 9/11. That’s right, it may well have been those very 9/11 events that helped boost the mountain resort business to its third-best season on record.
How, you ask? The events of 9/11 rearranged Americans’ priorities. According to the quarterly LeisureTRAK survey conducted by Leisure Trends, many families made two critical decisions last fall and winter: first, that they would spend more quality time together. And second, to spend this time in the mountains, which were considered safer havens than more densely populated, target-rich environments. These impulses were enough to overcome the negative influences of warm weather, a late start and early end to the season, a weak economy, fear of flying and—yes—lingering worries about terrorism. So, while 9/11 has crippled the airlines and pinched the travel industry generally, it has benefited mountain resorts.
Short Turns
In Utah, The Canyons and Snowbasin are looking for new leadership: former GM Blaise Carrig has left The Canyons for Heavenly Resort in California, and no replacement has been named for Snowbasin’s GM, Gray Reynolds, who left shortly after the Olympics.
Snuck in among Yalie classmates and oil patch buddies who have recently enjoyed White House sleepovers is Joe O’Donnell, Boston food service exec who is a 50-percent partner in Jiminy Peak and Brodie Mountain in Massachusetts and owner of Bromley Mountain in Vermont.
