An anonymous insurance industry source explained that Santas account presents major underwriting challenges, including the following:

Santas North Pole home and workshop are in a very rural area, and fire protection is not adequate for the exposure. The home and shop combined are roughly 12,000 square feet (made entirely of ice) and does not contain a sprinkler system. The property is adjacent to a large body of water, increasing exposure to loss as a result of windstorm. Icy conditions also lend themselves to slip-and-fall exposures.

Santa has a serious commercial auto problem. On his world-wide excursion once a year, Santa has been known to drop unsecured material from the back of his vehicle, potentially causing damage to homes and other property. Santa also is getting on in years, and there is some concern his driving skills have deteriorated–especially in snowy conditions. Santa has also been spotted riding without a seat belt, and due to lack of a credit history, his score is ineligible.

Santas workers compensation program is also a serious concern. Many of Santas elves work in roles that require repetitive motion, creating a carpal tunnel exposure. Santa is also prone to OSHA compliance problems as his workplace is a bit outdated, and his employees work around-the-clock every December.

Santas general liability may be his biggest problem. It seems the workload has gotten so great that Santa has begun using sub-contractor manufacturers to help meet the demand for toys around the world. He also reportedly lacks product liability, errors and omissions, and employment practices liability coverage.

Santa lacks key man life insurance. So far he has been unsuccessful in finding an affordable policy, as he is overweight and rather old.

Santa has been shopping his health insurance for years, but few will write such a small group, rates are soaring, and there are no in-network doctors at the North Pole.
Santa and his independent agent met last week to discuss options, with Christmas Eve looming. The agent explained he had sent submissions to all of his standard markets and several wholesalers–noting that on the plus side, loss runs for the past 100 years are all perfectly clean.

The agent told Santa he was sure he could obtain quotes for him, but the cost would go up quite a bit, coverage would be more restrictive, and the carriers might not be as well known.

For the longer term, however, the agent had a number of risk management suggestions for Santa to help make his account more marketable.

Hire a fulltime risk manager, or at least allow his agent to conduct a loss control and safety survey of Santas home and workshop.

Put together an employee manual and provide instructional DVDs to all supervisors and elves to avoid EPLI claims.

Expand his in-house manufacturing operation to eliminate the use of sub-contractors and control his liabilities.

Consider self-insuring some hard-to-place risks in a captive. Bermuda was dismissed as too warm, but Vermont would be acceptable.

Continue lobbying legislators to create a special federal reinsurance program just for Santas exposures. (Unfortunately, passage this year is unlikely, as Republicans believe the private market should handle the problem without a government bailout, while Democrats see any such move as a violation of the Constitutions church-state separation.)

In the short-term, Santa is optimistic he will make his gift run despite any insurance woes, with officials from major toymakers and greeting card firms offering generous pledges of support if soaring premiums threaten to sink his non-profit shop.

In addition, insurers are reportedly wary of cancelling Santas coverage for fear of receiving lumps of coal in their stockings–not to mention the bad publicity!

MERRY CHRISTMAS and a HAPPY NEW YEAR to us all!!!

Thomas J. Crowley is a partner at Maran Corporate Risk Associates in Southampton, N.Y.