Although the 2006 storm season was a blessedly quiet one for most insurers and property policyholders, the massive hurricanes that hit in 2005 and 2004, along with the potential for future catastrophes in disaster-prone areas, have made for a case of haves and have-nots when hotels seek to obtain insurance.

"It's really a tale of two markets," said Brian Ruane, a senior vice president and director of the real estate and hotel practice of Willis Group. "One of them is softening and the other is just stabilizing, with some areas that are still seeing increases because of catastrophes."

Virtually every market line--including third-party liability and commercial auto coverage--are seeing a softening trend for those outside of catastrophe-prone areas, he noted. But those in earthquake zones or along wind-threatened locations across the Gulf Coast and parts of the Eastern seaboard are still paying for the potential losses another major event would bring.

Unfortunately, Mr. Ruane said it's not simply a case of pricing for catastrophe-prone risk, and it's also not something that will necessarily be resolved over time.

"They're getting used to a new world, but it's not a pleasant place," he said. One major adjustment these property owners are being forced to make is dealing with sharply increased deductibles. As an example, he noted that windstorm deductibles used to be 2 percent, but now generally run 5 percent in vulnerable areas.

"Unfortunately, there's not a lot that can be done," he said. "The deductibles are a much bigger piece of the pie."

Brooks Chase, president and chief executive officer of the Resort Hotel Association--a not-for-profit, member-managed insurance association--offered a somewhat more optimistic picture of the markets for disaster-exposed hotels and resorts, noting that very little has been settled at this point.

"Obviously, in the Southeast and earthquake-prone areas, everyone's on tenterhooks wondering how that market's going to fare," he said.

One of the major elements that will affect the market, he said, is new modeling work being done by Risk Management Solutions. Until modeling adjustments are complete, however, he said the market is still fairly "green" and needs time to develop further before rates improve.

"The reinsurance market is trying to position and figure out what others are doing," he said. "It's difficult to determine at this point."

What insureds are doing, along with their brokers, both Mr. Chase and Mr. Ruane said, is placing an increased emphasis on knowledge of their own exposures.

In working with RMS on modeling natural disaster risk, Mr. Chase said his association is making every effort to supply as much information as possible about its resort properties to obtain reinsurance coverage, and sending out its own inspectors to assess individual properties, if necessary.

"We've spent a lot of money to ensure that all of the information is there" to accurately model the risks to a particular resort, he said.

Mr. Ruane noted that although little can be done to rein in an increased deductible, the market is teaching clients to be better consumers. Buyers have begun asking for the models to see just how bad things can get for them in the event of a major catastrophe. "They want to be educated as to what's the worst-case scenario," he said.

Such thinking has not only led to smarter consumers, he noted, but has also prompted those buyers to ask more questions of themselves. Specifically, Mr. Ruane said it has resulted in an increased interest in business continuity coverage, and forced them to ask the question, "How do you make sure you get back up and running, get back in business?"

Mr. Chase said he's also seen an uptick in buyers being concerned about their own risk. The RHA, he noted, has recently aligned itself with the International Spa Association to help its members mitigate and insure their exposures.

"It's such a new industry," he said, with many spas concerned about their risks but lacking the experience to deal with them effectively.

Larger resorts, such as those in the RHA, "take risk management very seriously," he said, adding that the RHA is helping to educate ISPA members about loss control and best practices.

Wayne Herrington, a regional executive officer for Willis covering the Southeast and leader of the firm's casino practice, said that states in the Gulf region are also helping some of the major casinos that were damaged or completely wiped out by Hurricane Katrina.

For example, he said Mississippi's recent law allowing casinos to at least be built on actual land, albeit very close to the high tide mark, has eased the burden somewhat, but the risk is still there, he noted. Before the new law, those casinos were only allowed on riverboats or docks.

However, Mr. Herrington said that, while it is understood that underwriters did not make up all of their prior losses in one year, Willis plans to pursue coverage terms and rates aggressively. "It's not going to be a walk in the park, but we're seeing signs" that conditions may not be as bad as they have been, he said, adding that the changes to allow building on dry land are a "huge plus."

Even those buyers who are largely outside the zone of natural catastrophes are asking these questions, Mr. Ruane noted--mainly because of the increased awareness about terrorism. "9/11 put a light on the worst-case scenario" that has only grown since, he said.

Mr. Herrington said that terrorism is a special concern for many large casinos because of concentration, noting areas such as Atlantic City or Las Vegas.

Indeed, Las Vegas presented even more of a terrorism exposure in the immediate aftermath of 9/11, he added, because the city's main airport is so close to the famous "strip" where many major casinos are located.

Not surprisingly, Mr. Chase said the RHA is waiting to see what happens in Congress during the next few months as lawmakers work to establish a long-term replacement, or at least an extension of the Terrorism Risk Insurance Act--set to expire at the end of the year. As with much of the insurance industry, Mr. Chase said he'd like to see the fate of TRIA's federal reinsurance backstop "sorted out' as quickly as possible.

Outside of property coverage, hotels are continuing to face many of the same challenges they have been wrestling with over the past few years.

Ensuring patron security is an increasing concern, Mr. Ruane noted, adding that Willis offers inspections to clients to assess their security needs.

Although security at hotels is often rigorous, Mr. Ruane said that Willis does sometimes offer recommendations after checking out a location.

"People want two things when they stay in a hotel: clean rooms and to feel safe," he said. "We can't help clean the room, but we can help them feel safe."

Additionally, staff turnover is a continuing problem, according to Mr. Ruane, who said that many hotels find it necessary to offer comprehensive insurance benefits, which Willis can tie to their workers' compensation policy, in order to attract and retain top talent.

The competition, and the benefits, he noted, occur "from the chamber maid all the way up" throughout the hotel industry.

"If they don't" offer these benefits," he said, "then someone else will."