Insurance: How Covid has Changed the Standards

The Covid-19?impact will still be felt over the next year or two. The fact is, that more and more insurance companies have gotten out of the business. They are no longer insuring facilities like family entertainment centers, water parks and amusement parks. They know that it’s just too risky and they are losing money.?In addition, as insurance companies stop insuring entertainment businesses such as parks, they are also still adamantly fighting insured losses created by the pandemic.?

The insurance industry took a severe hit because of Covid. Think about the enormous claims that arose from it all: loss of business due to business closures during the pandemic as well as other perils – theft, fire, worker compensation & unemployment claims, general liability claims, etc.?

Of course, the larger parks like Disney, Universal, Sea World, Six Flags, Cedar Fair, etc. will be able to get insurance as they are so large and successful. Or they have the funds to be able to self-insure their businesses.

Most parks and FECs are small operators. The sad truth of it is that many may go out of business as many insurance carriers have decided to not write any more businesses in these markets or even go out of service altogether.?If they do write the insurance for the entertainment companies, most carriers will raise rates 30% to 1,000%.?Do the math; that’s 10X what a company may have paid for their premiums just prior to the pandemic. Not to mention it might also (likely) provide less coverage for those additional costs.

If that’s the case, many family entertainment companies may opt to close their doors permanently, as they must have insurance to stay in business or they may need to significantly increase park prices to compensate for the increased costs of insurance.??

This is a concept that strikes fear into entertainment park owners. You can only increase prices so much otherwise guests will choose cheaper places for family fun.?Owners know, to operate family entertainment centers, water parks, and amusement parks, there must be insurance in place to properly be licensed in their states. The regulations and laws have to be followed, or you face a facility shut down by the governing state agency.?

No one wants to be another “Action Park” that had several insurance-related claims and a lack of insurance in New Jersey that ultimately was sold off to another party.?

Only time will tell the results of this social post-pandemic saga, but many family entertainment centers, water parks and amusement parks may get out of the business altogether.

So, what’s your outcome going to be? What’s your strategy to afford the new premiums in order to remain in compliance with your state regulations?

07-09-22

?Tim Murphy is CEO of APX Operating Company, dba Boomers Parks, under the ownership of Cerberus private equity ($55B assets). Boomers Parks owns six family entertainment centers and two water parks with locations in California, Florida, and New Jersey.

As CEO of Boomers Parks since 2020, Tim took these eight parks from bankruptcy to profitability in just a year – in the middle of a global pandemic. When Boomers acquired these parks, they were operating at a $10 million loss. Tim transformed the customer experience and added new revenue streams to generate a 180% increase in revenue in 2021 (and on track to be a 250% increase in 2022).?

Tim launched his 35+ year career at Walt Disney World and has since served more than 150 entertainment, restaurant, and food & beverage brands across more than 10,000 locations in C-suite and senior positions.

?Additionally, Tim is a Board Director with Coney Park, Happy City, and YuKids - Family Entertainment & Amusement Parks, part of The Carlyle Group ($275B assets), a private equity firm that operates 150+ family entertainment centers and amusement parks in Latin America.?

?Tim has worked with top-tier entertainment and restaurant brands including Disney, Rebounderz Trampoline Parks, Darden Restaurants (Olive Garden, Bahama Breeze, etc.), Red Lobster, Jimmy John’s, Applebee’s, Sonny’s Bar-B-Q, Denny’s, El Pollo Loco, Hardee’s, Golden Corral, and Firehouse Subs.?

Tim has overseen more than 35 purchase transactions involving over 1,200 restaurants, stores, and park locations.?With extensive experience in buying and selling businesses, handling negotiations with buyers and sellers, and creating strategic partnerships to build strong brands, Tim has facilitated deals ranging from $11 million to $350 million+.

?Tim is a member of IAAPA, CAPA, FAA, AAMA & WWA. He is a licensed commercial real estate broker in the State of Florida. Tim earned a BS/BA in Accounting from the University of Central Florida and?an MBA in Finance from Orlando College.