Risks Multiply When Recreation Turns to Adventure

Vacationers and tourists are no longer content to sit and relax; they want adventure.

The global adventure tourism market is forecast to grow by as much as 46 percent by 2020, according to the Global Adventure Tourism Market 2016-2020 report published October 2016 by SandlerResearch.org. In 2015, the adventure tourism industry generated revenue of $7.88 trillion.

“Increased preference for adventure over other tourism activities will be a key driver for market growth,” the report said.

Instead of staying at beach cottages or going sight-seeing, vacationers are increasingly opting to go skydiving or rock climbing, caving or deep-sea diving and similar high risk activities.

Insurers are having to keep up with the trend.

“Campgrounds, RV parks, dude ranches, resort lodges — those are some areas where we’ve seen a shift going on,” says Doug Killeen, vice president of underwriting at Philadelphia Insurance Companies. “Those places are feeling the pressure to add many different services and a lot of those services are in the adventure realm.”

Campgrounds used to be where vacationers would spend the night, perhaps swim in the camp’s pool or play a round of putt-putt golf.

But times have changed.

It’s no longer enough for a campground to offer traditional activities such as hiking or swimming, according to Krystal Allen, underwriting manager at Philadelphia Insurance Companies. Many campgrounds are adding things like inflatables on a lake, jumping pillows and climbing walls, she said. Even upscale resort lodges are finding customers want white water rafting, mountain biking, ropes courses and ziplining.

Entertainment

“Now campgrounds are more geared to having entertainment for the children; they are more than just a place to stay and see the local sites,” she said.

Parks are adapting to consumer demands as well. “It’s not just a swing set anymore. Parks are adding these large climbing apparatuses geared toward entertaining the children on premise,” she said.

Leisure and recreation companies are finding that if they don’t want to go into riskier activities they must at least add more for their guests to do than in days gone by.

“The common thing we see a lot is having to have a dozen activities to offer,” Killeen said. “It’s not all just high-thrill but places feel the need to offer a lot – ice skating, snow shoeing, dog sledding or snow mobiles.”

Specialized Adventures

One insurance specialist is betting his company’s future on the adventure trend.

Isaac Allen, president and CEO of The Northman Co., a managing general underwriter and managing general agency, is focusing his firm on “insurance for the wild.” Allen founded his firm a little over three years ago looking to write a variety of risks including construction and energy.

“We were touching everything at that point,” he said of his agency’s beginning.

But it did not take long for him to refine the mission and take his own business on an adventure.

For Allen, targeting adventure comes naturally. He competed in college football and rugby and calls himself a life-long outdoorsman. Those he hired were also into sports.

“Our entire team is from the sports and entertainment world,” he said. He came to realize that many of his Northman’s clients were from sports and entertainment as well.

“As we started to examine our client base we noticed that the biggest impact was going to be made in the sports and entertainment industries,” he said.

He was also motivated by personal relationships.

“I have a lot of buddies that travel for sport and compete for prizes. At the same time they were having a real difficult time finding life (insurance) programs that would actually cover them for their events or for a lot of the back country things they do. That’s how it started,” he said.

The sport and adventure industry has changed and for the past year Northman has been trying to educate insurance markets on that change, according to Allen. Both the London and Bermuda markets compete in this space.

“They are recognizing that the industry has matured and it’s a global. This was an industry where guys were living in the back of their trucks five years ago. Now they are getting sponsored for hundreds of thousands of dollars if not millions a year.”

Large companies are moving into this space as well – from energy bars, to health food companies and equipment gear. “We’ve had to educate these markets and bring them up-to-speed on the maturity and risk management and risk mitigation sophistication of the industry today,” he said. Part of that education has come from collecting and analyzing industry data.

“Our data show not only are loss ratios better today than five to eight years ago, but also that the adventure sport industry is growing in size,” he added. And these adventure seekers are looking for the best coverage too.

“This market has a client demographic that is begging for accurate coverage. They want it and they don’t even have discrepancies with paying a higher premium if it’s the best coverage, if they know that if something goes wrong they are covered. That’s their biggest issue.”

In the sports sector, in particular, Allen said there has been “massive gaps” in data. “There wasn’t a lot of statistics of actual loss runs and especially a lack of attention on risk management and mitigation. We recognize that as differentiators and that’s what we’ve built our team around.”

Northman is ready to embark on a whole new adventure in expansion. Allen said the firm is in its last round of securing $100 million funding to acquire similar businesses. “I can’t name funders at this point but we are about three weeks away from having that completely done and able to announce,” he said.

In preparation, Allen has brought on board some heavy-hitters in the adventure sports and events world:

• Chris Davenport, a two-time World Champion skier widely regarded as one of the premier big mountain skiers in the world today, joined Northman to lead the adventure sport division. Davenport is also a team member of the Kastle Ski Co.
• Tim Cadiente, a former marketing guru with Oakley, is leading the Northman entertainment division and serving as chief creative officer.
• Tad Pilati, joined Northman as chief marketing officer, from Beats by Dre.

Allen thinks the adventure world will continue to grow for a few philosophical reasons.

“I look at the way we function as society now; it is so safe. We sit in an office, then we go home to a really nice place where we have food and hot water, we make pretty good money and have health care. Life is very safe.”

But he maintains humans are meant to have a dose of adrenaline.

“When you get into sport and you get into those adventure experiences where it makes you completely focused with a clear mind, for me it’s my purest form of meditation. I go into sport and I think about nothing except my mind and body connection, whether it’s trail running or rugby; there’s nothing going on in my head except for survival and execution of my body and muscle memory. It forces you back into primitive survival mode.”