Avid remains committed to dynamic Leisure Sector
04 December 2020
Of the sectors that have been battered during the last few turbulent months, the leisure industry has perhaps had the worst of all deals.
People rely on it to provide them with activities and entertainment in their spare time, but ironically, at a time when many people have never had more spare time, it has had to close down.
Even before the pandemic, the sector was braced for a period of change, as the traditional composites looked to de-risk with reduced line sizes, some exiting specific trades whilst others exited completely.
This early turbulence was starting to flow through in to the MGA space too, with capacity providers looking for the more predictable and attrition-based business with a distinct aversion to volatility.
The MGAs have had to adapt to this changing landscape with the emphasis more than ever on their “added value”. Those whose results, systems and analytics are not good enough will struggle. We’ve seen, for example, the closure of Leisure Insure earlier this year after 24 years trading as their capacity was withdrawn.
When Covid arrived, it piled on top of these tough market conditions to create a perfect storm.
So you might wonder why anyone in the insurance business would choose this moment to focus on the leisure industry.
All this has had a drastic impact, certainly but my 25 plus years in sports, leisure and equestrian tells me that there’s a huge amount of resilience, creativity and adaptability out there.
There is also a shortage of expertise - be it in broking or in underwriting - in a hard market to which many have not been previously exposed, and this will create further opportunities.
My focus right now is on attractions, activities events, equestrian and sport in general. Whilst many businesses have been closed during periods of lockdown, they have had to adapt whilst others remain scaled back until the current restrictions are eased.
If you take equestrian for example, it has been pretty resilient and whilst riding lessons had to be suspended temporarily, there is still the Livery aspect to consider as horses still need looking after. With gyms, footfall has been badly hit as access numbers have been controlled, but the diehards have still been going and most operators are highly responsible about protection processes.
My underwriting philosophy has been very simple. I look at how a business is run rather than what the business does - it is the “how” that matters. You could have two gyms with the same equipment and services, but one can have the right attitude to risk, being pro-active with a quality of management that stands out.
So there’s a window of opportunity here. Risk selection is key, and taking on businesses at time when their operating costs are under significant pressure means risk management needs to remain a high priority.
It’s important that we do our bit to support them, too. For example we’ve been working with trade associations on guidance and checklists to encourage best practice.
Looking to the future, my belief is that the pendulum is going to swing back towards specialist underwriters. The larger insurers may have been tempted to enter this sector, and have been able to establish scale in the past, but rarely have they had the nuanced expertise that is so necessary - particularly in a hard market. So it’s going to be good time for specialists to build on their position.
Servicing can be streamlined as much as possible and our smaller equine business as an example can easily be automated. But there are non-standard sub-sectors like riding for the disabled and equine-assisted learning that need a specialist personal touch.
This is a people business, and building great relationships with supportive brokers is so important. The key will be working in partnership and selecting the business to go after.
I firmly believe that brokers can make a difference to the quality of business they introduce.
So I take a glass-half-full-view of the future, and despite the challenging environment remain committed to the dynamic businesses that make up the leisure sector.
Mike Patchett - Avid Insurance Services Limited