Lloyd’s brokers and underwriters are rushing to provide the specialist cover needed by Santa Claus to make sure that Christmas takes place as planned.
Growing regulatory red tape and fears over litigation, combined with an increasingly risky logistics environment has made it difficult for Santa Claus, who also trades as Father Christmas, to obtain the risk transfer solutions he needs to stay in business.
The legendary gift distribution network whose base is in the North Pole is exposed to a wide range of property and casualty risks.
However, with the credit crunch causing many global insurers to reassess their risk appetite and reduce available capacity, Lloyd’s specialist insurers could be Santa’s last chance.
“If anyone can provide the wide range of covers needed for Santa to keep Christmas on the holiday calendar it is Lloyd’s,” says Lloyd’s spokesperson Tiny Bart. “Children around the world rely on the smooth running of his highly complex, annual operation. And we’re not going to disappoint them.”
The basic coverages sought by Santa Claus’ risk manager elf include sleigh insurance, goods in transit and, given the multi-modal nature of the deliveries, aviation insurance. Although the aviation market is hardening, Claus has a good loss record on both the 'hull' and cargo side and should be able to obtain affordable coverage in the Lloyd’s market.
Claus will also benefit from risk improvement and has equipped the sledge with a GPS-style tracking device to deter would-be thieves.
Cover for flying reindeer has previously proved difficult to find outside Lloyd’s but the market’s bloodstock specialists are confident they can provide sufficient cover, insiders say.
The global Christmas delivery service is fraught with liability issues—both public liability (PL) and employer’s liability (EL). In terms of PL Lloyd’s does not have a realistic disaster scenario (RDS) for Christmas—but underwriters understand only too well the potential claim that could result from a sleigh load of presents landing on a US law firm’s Christmas party, for example.
In terms of EL, the grotto distribution centre has a good health and safety record but an employer's liability mass tort from elves is an ever present possibility as the compensation culture spreads towards the North Pole.
Santa Claus himself has a significant risk profile in view of the uniquely personalised service provided. An exemption in so-called working at height regulations still allows gifts to be delivered via chimneys where possible and so personal accident cover is crucial.
But Santa’s intangible risk portfolio is growing fast. Costs incurred defending intellectual property rights can potentially be covered by Lloyd’s specialist insurers. “But Santa’s reputation and brand is also an important asset,” Tiny Bart notes. “Loss of reputation could potentially let in a competitor, leaving Santa with one of the biggest distribution facilities in the world and no customer base.”
Loss of data is another important intangible risk issue for Santa. He holds the personal details of billions of children, including their addresses, their wish lists and remarks on their behaviour in the run up to Christmas.
“Other global insurers have placed so many exclusions on their policies that Christmas is in jeopardy,” Tiny Bart says. “I’m glad to say that at Lloyd’s there is no such thing as a Santa clause.”