Apr
12
2007
Mississippi Casinos Consider Dumping Property Insurance
Author: Valeria WeberPenn National Gaming, the third-largest U.S. gambling company, is considering going without property insurance at its U.S. Gulf Coast properties as the costs for property coverage soar in the wake of Hurricane Katrina.
“We are doing a lot of soul-searching about whether it makes sense to have insurance in the Gulf Coast … Katrina may be a once-in-40-year type storm,” Penn CFO William Clifford told the company’s investors at an annual meeting. The company is publicly held. Katrina destroyed two of their facilities, one in Biloxi and one in Bay St. Louis Mississippi.
Clifford said the company is still haggling with their insurers over their aggregate claims as a result of Katrina. They have, however, collected $132 million in claims filed as a result of the storm. Prior to Katrina, Penn was paying Berkshire Hathaway $20 million per year for $200 million in coverage on all of its properties.
Penn’s CEO seems inclined to believe that Katrina was part of the storm cycle typical to hurricanes in the region, rather than a harbinger of changing weather patterns due to permanent climate changes. “It might make more sense to sock away that premium,” Clifford said. If the changes in premiums for Gulf Coast homeowners are any indication, the property and casualty premiums in the area for commercial enterprises are going to take a quantum leap.
Apparently, however, rates for commercial facilities such as these casinos are more flexible than consumer rates. Mr. Clifford said that insurance costs were likely to “remain high” for the next couple of years, and then take a dip if there are a few years with light storm seasons. Perhaps Penn feels that their insurance rate had already topped out. If that’s the case, it’s very different than the experience for tens of thousands of Florida homeowners.
