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High-risk activities and remote locations mean that ski resorts in Canada face big premiums--and require specialized risk management

Brynna Leslie on March 1, 2011

There are approximately 150 ski resorts in Canada, a number that fluctuates each year depending on the quality of the previous winter season. Personal injuries on ski hills are often fatal; property claims catastrophic. Given this combination of a relatively small market with big risks, it’s not surprising that just a handful of insurers operating in Canada are willing to be exposed to that level of comprehensive risk, and less than a dozen brokers have any real expertise in the area.

Skiing is a highly individual sport. It’s for that reason that many in the insurance business find skiers are at higher risk of personal injury than those who play team-oriented sports. Helmets and other protective gear have become recommended or mandatory on many hills in the wake of high-profile tragedies like the death of British actress Natasha Richardson after a fall at Mont Tremblant, Quebec in March, 2009. (Two students died on the slopes of Blue Mountain and Snow Valley resorts in Ontario the same month.)

Even with helmets, however, ski risk has increased in the last few years as resort operators are now allowing once-forbidden activities on the slopes. The creation of terrain parks, including race courses, jump runs and half-pipes has increased their exposure. And the investment into all-season adventure activities, such as ziplines, mountain bike runs and roller coasters has been a game-changer for those insuring the industry.

“When there are accidents, it’s very expensive and it’s not pretty,” says Alexis Harke-Hunt, the managing director at Jardine Lloyd Thompson (JLT) Canada. “We’ve seen people get run over by Snowcats and other grooming equipment; spectators at the bottom of a race course wiped out; and with snowboarding, there are a lot more person-on-person injuries. In the summer, we now have to think about jagged rocks; it’s a whole different exposure for these clients.”

Off the slopes, there are other liabilities common to hospitality services, including liquor exposure and proper food handling. And with resorts catering to families, many resorts now hire outside companies to provide horse and carriage rides, child care services and equipment rentals 12 months a year, adding a new level of risk.

“Ironically, the largest risk associated with resorts that have chalets is still slip and fall issues,” says Jamie Gougeon, the sales manager in the commercial program department at Gougeon Insurance Brokers, headquartered in Sudbury, Ont. “It makes sense when people are moving from chalet to ski hill to restaurant, from activity to activity. We always want to know that our resort clients are maintaining pathways between buildings, salting and sanding in the winter, and generally making sure people have access to clear and safe paths.”

Insurers also want to know who, specifically, is at risk, says Janice Bindon, vice-president of national commercial lines, underwriting and pricing at Aviva Canada Inc.

“One thing we want the broker determining up front, for example, is how many Americans will be on the property in a given season,” says Bindon, “because it is possible for Americans to sue in the United States, and the US is very well known for providing high rewards for bodily injuries. When you’re looking at the potential for severe bodily injury–brain damage, paralysis–and the level of ongoing future care required, you’re often looking at a minimum of $10 million in liability. That number is of course highly variable depending on the size of the resort, the number of runs and what kind of accommodations you have on-site.”

Brokers also need to make sure resort operators can provide proof of insurance for individual sub-contractors on the property. For example, a ski club operating at a resort requires insurance based on the length of the season–which is longer in the mountains than on slopes in central Canada–how many skier visits they will make, and what kind of exposures they have. Likewise, a ski instructor on a small hill needs about $2 million in general liability coverage, says Colin Fairlie, a senior underwriter at Sutton Sportscover Ltd. A resort like Whistler may require each individual instructor to have $5 million coverage.

“If there is a ski club operating at Whistler without liability coverage and something goes wrong with one of their members on the hill–they go down a hill that’s too steep or into the woods, hit a tree and get seriously hurt–they’re going to sue everybody in sight,” says Fairlie. “The owner of Whistler may find themselves on the hook because this ski instructor and this little club don’t have coverage.”

Remote Property
On the property side, rustic winter lodgings have given way to year-round luxury hotels, time-share condominiums and million-dollar chalets over the last two decades. Mechanical lifts are now computerized, expensive pieces of equipment; and snow-grooming machines are worth tens of thousands of dollars. Yet they all sit, highly concentrated, often on the edge of a forested mountain, and often far away from fire hydrants and other emergency services readily available in an urban area.

“In many cases, these are considered unprotected frame properties,” says Alexis Harke-Hunt about modern ski accommodations. “You can have four or five million dollars clustered on the side of a ski hill, and if you get a fire in there, you’re probably going to lose it all.”

There are large boiler and machinery exposures, avalanche risks, increasing threats from forest fire in places like the Okanagan Valley and the Rocky Mountains, all in remote locations, often in inclement weather.

Black Diamond Business
The biggest mistake brokers and insurers have made in the past is jumping into the ski resort market without understanding the risk management the industry requires, says Bob Bell, a former broker and risk manager, and the current vice-president of operations and maintenance at Marmot Basin in Jasper National Park.

“In the past, a broker has come in, only seeing the pot of gold at the end of the rainbow, but doesn’t really understand the industry,” he says. “Yes, there are big premiums in the industry, but the claims are also big.”

The catastrophic nature of both property and personal injury claims has caused some insurers to back away from the industry altogether; one reason that three firms–Lloyd’s, Chartis and Aviva–now underwrite the vast majority of the ski resort business in Canada.

“The ski industry is fickle and so are the carriers,” says Jeff Krause, president of Krause and Butt Insurance Brokers Ltd. in Barrie, Ont. “Too many have been drawn in by the big premiums, suffered a major loss and then got out.”

The Canadian ski resort industry is, however, an excellent example of how brokers with the right program and expertise can achieve success by specializing in a niche. Eleven years ago, Krause and his now business partner David Butt wanted to find a way into the ski business. They joined forces with Willis of New Hampshire, one of the top brokers for ski resorts across the United States and the managing general agent for what is now known as Chartis. Krause and Butt now insure 55% of the roughly 3.5 million skier visits in Ontario each year, including those at Blue Mountain, Craigleith, Horseshoe Valley and Mount St. Louis Moonstone. The firm is the exclusive broker of Chartis’s MountainGuard program in the province.

The impenetrability of the industry may frustrate those trying to tap into what seems a lucrative market, but Bell says the monopoly serves the ski industry well.

“If you, the broker, hurt the insurer, they will pack their bags and go,” says Bell. “If this happens too many times, it threatens to leave the industry uninsurable.”

Managing Risk on the Slopes
“There are no ‘new brokers’ coming into this industry,” says Bell at Marmot Basin resort who has worked on both sides of the ski insurance industry for 45 years. Bell did an electrical apprenticeship at Grouse Mountain in Vancouver, earned his trade papers, and worked as an aerial tramways inspector for the British Columbia government for 25 years before becoming a certified insurance broker and risk manager in 2000.

“There is a myriad of risk out there,” says Bell, “and that requires serious risk management capabilities specific to the industry.”

At JLT in Edmonton, Harke-Hunt, who is also the national leader for JLT Canada Sports and Entertainment, says having an entire specialized team dedicated to the ski division has been key to JLT’s success.

“This type of insurance is not transactional,” says Harke-Hunt. “We are working with these people 12 months of the year.” It was Bill Dunlop on the JLT team who worked with the industry to craft the liability waiver on the back of lift tickets that is now commonplace at resorts across the country. JLT also has five engineers that visit the resorts to ski the hills, inspect the lifts and grooming equipment, check the maintenance schedules, and facilitate evacuation and catastrophe planning, sometimes multiple seasons per year.

Gougeon, which also has offices in Montreal and Calgary, employs a risk management team to address the day-to-day concerns of its resort clients. Over the years, the team’s expertise has developed to the point that they have innovated risk mitigation solutions for the ski industry.

“We spearheaded the Parkscapers program to develop increased knowledge of how to build terrain parks and to share that knowledge with individual ski resorts,” says Jamie Gougeon. “It originated in the classroom and ended with an on-hill session where we would build a terrain park from scratch with individuals from the ski resorts.” The course has now largely been taken over by Selkirk College in B.C., but Gougeon continues to advise clients on design of ski runs, terrain parks and other on-hill activities.

“Every single person on our team not only understands the industry, but as skiers and snowboarders, has a passion for the industry and specific, professional knowledge,” says Gougeon. “I’ve been skiing for 38 years and it’s through that that I really understand the individual concerns of our clients.”

Staying In Bounds

How the ski industry is banding together to mitigate risk

Year-round activities at ski resorts are high-risk. Volatility in the ski resort industry in recent years has put the market at risk of being uninsurable. It’s one reason brokers and ski resort operators are banding together to mitigate risk.

“Over the last 20 years, risk management has each year had an increasing role on the hills and in making them run,” says Jamie Gougeon of Gougeon Insurance Brokers. “A lot of hills now have their own dedicated risk managers and we offer a summer program to train them and keep them up to date on the insurance side.”

Jeff Courtemanche, the General Manager at Craigleith Ski Club in Collingwood, Ont., says his brokers do ongoing work with the resort management team on industry best practices.

“With insurance, all the resorts are pooled together in a group,” said Courtemanche, “so if one resort has a claim, we all suffer. The brokers are working with us, providing professional engineers and risk management to make sure we are maintaining the standard of their entire pool of clients. If they have a lot of claims, it’s going to put everyone’s premiums up and it’s going to be a lot harder to get insurance for any of us.”

Brokers also encourage their clients to carry a high deductible, covering off small incidents themselves, so the insurer doesn’t get flooded with a myriad of small claims throughout the year.

“We even deal with small accident investigations and claims on our own,” says Bob Bell at Marmot Basin. “But more importantly, we try to be proactive and present a common front for risk mitigation across the industry.”

Brokers have worked in conjunction with regional ski associations and ski resorts across North America to standardize signage for boundaries and other hazards. They also encourage clients to do everything in their power to avoid catastrophic claims.

“If someone crosses out of bounds into the wilderness, there’s no legal requirement to go and get them,” says Bell. “But there is a moral responsibility, and we want to make sure we are meeting the same duty of care standard as everyone else in our industry or it brings everyone down.”