Insurer Sportscover surprised by Small Business Ombudsman's support for attractions mutual fund

Leading industry insurer Sportscover has questioned the recommendation in the recent The Show Must Go On report from the Small Business and Family Enterprise Ombudsman that a Discretionary Mutual Fund (DMF) be established to help the amusement, attractions and theme park sector.

Commenting on the report, which was released earlier this month, Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Bruce Billson suggests that in a hardened global insurance market establishing “a DMF as the only current workable solution to the immediate need for coverage in the sector.”

However, Sportscover Australia Chief Executive, Simon Allatson suggests that establishing a DMF for the amusement, attractions and theme park sector is not the right course of action, expressing surprise that the Ombudsman is supporting an attractions sector-based DMF.

Speaking to Insurance Business Australia (IBA) and the InsuranceNews website, explaining that creating a DMF might not solve the perceived insurance availability issues in the long term because the mutual will be subject to the same market forces, but on a reinsurance basis – which he claimed has failed many times in the past.

Allatson told IBA “it was our submission (to the Ombudsman) that a stronger focus on quality assurance, risk management, safety protocols, and training would provide greater security for the sector.”

Allatson pointed to Sportscover Australia's leisure arm, Active Underwriting Specialists (Active) which insures more than 3500 policies in the sector and of available insurance capacity, commenting “Active Underwriting has demonstrated over many years that there are insurers able and willing to support the sector.

“However, as in any market, there are good risks and poor risks. A DMF should not be established to subsidise poor risks at the expense of operators who are operating safely and professionally.”

Going on to say that Sportscover and Active have partnered with various syndicates at Lloyd’s to provide capacity for policyholders over more than 30 years, he added “it is just simply not correct to say there is only one insurer servicing the amusement and leisure sector.”

In its response to the Ombudsman, Sportscover highlighted how among its policies in the  sector most have been with the agency for more than three years, suggesting that the market is going through a normal cycle and “weeding” out underperforming risks rather than going through an insurance crisis.

With The Show Must Go On report having advised that a DMF is unlikely to succeed without substantial government involvement at all levels it currently remains to be seen with such input will be forthcoming.

The report acknowledges another potential stumbling block that a DMF for the amusement, attractions and theme park sector faces, in stating “mutuals are known to operate more effectively where there is a regular pattern of relatively small losses as opposed to infrequent catastrophic losses.”

Images: A number of rides familiar at past editions of the Sydney Royal Easter Show were not on site this year because of insuranc issues (top) and The Show Must Go On report (below).