Assembling 60,000 people in a stadium to watch a sports event is a daunting prospect. Natural disasters, a terrorist attack and crowd control are just a few of the hazards that come to mind. Now multiply these threats by 22—the number of stadiums in the property insurance program of Major League Baseball.
Anthony Avitabile is the risk manager tasked with handling these spine-stiffening hazards. On his bench is FM Global, the giant international property insurer that absorbs the lion’s share of the financial risk. Five years ago, when Avitabile sought an insurance partner to simplify his patchwork quilt of an insurance program and provide vital engineering risk services, FM Global stepped to the plate.
The league’s previous program involved more than 20 different insurers, each taking a little piece of the action. The multiple moving parts created vast unpredictability from year to year as carriers moved in and out of the program or absorbed different layers of risk. “It was extremely cumbersome and time-consuming, especially when there was a claim, given all the parties and their respective locations,” says Avitabile, Major League Baseball’s director of industry risk management, who's pictured at right.
Now the league’s 22 individual stadiums, minus the eight that are owned by municipalities and leased by teams, are covered for property risks by two carriers—Lexington, an AIG company that takes a small primary layer, and FM Global, which is on the hook for the big-ticket losses. The insurer also covers the entirety of the 22 stadiums’ terrorism losses (minus a deductible), backed by U.S. government-provided reinsurance.
MLB also owns a captive insurance company (Burling Insurance Exchange) that previously absorbed the bulk of terrorism threats. Burling now bears the deductible on the terrorism insurance. Like all complicated towers of property insurance coverage, the MLB program has occurrence limits and aggregate limits, specifically with regard to the flood and earthquakes perils of individual clubs, though the risk of loss is deemed highly unlikely, e.g., two earthquakes hitting a stadium in the same policy year.
While this simpler and more seamless insurance program frees Avitabile to focus more on strategic risk assistance to the league and its teams, there is another reason why FM Global was drafted—its cutting-edge loss engineering services.
Today’s baseball stadiums, like Marlins Park in Miami and the new Yankees home field in New York, are a far cry from yesteryear’s diamonds. Retractable roofs, high-tech scoreboards, and sleek architectural features have become common. Peanuts and Cracker Jacks compete with rib-eye steak and fish tacos. At the same time, Mother Nature is more tempestuous—no surprise to anyone who lost a hat when a rare tornado struck Queens, N.Y., home of the New York Mets’ new Citi Field, earlier this month.
“We had several new stadiums that were going up and others set to be constructed, and wanted to tap FM Global’s engineering expertise,” says Jonathan Mariner, MLB’s CFO, pictured at right.
“We wanted their advice on ways to reduce the premium rates through engineering loss prevention," Mariner says. "They had looked at some recently built stadiums the year they took on the insurance program and said, ‘Had you done this or that, you would have saved some money.’ That resonated with us.”
Mike Ducharme, MLB client service manager at FM Global, cites three specific recommendations the insurer made as Marlins Park was being designed. One involved the stadium’s retractable roof.
“We’re used to testing wind uplift with typical rectangular buildings, but not odd-shaped structures like a stadium,” Ducharme says. “That took some deep thinking. We built a scale model and tested the roof against a variety of wind forces, ultimately working with the stadium’s engineers to configure a roof capable of withstanding 145 mile per hour winds at three-second gusts—a Category 4 storm. Interestingly, we also learned that uplift decreased when the roof was partially open, which is now protocol in advance of a storm.”
Two other pockets of vulnerability were the stadium’s external, moveable glass sidings and flood plain risks related to a series of canals nearby in the park. “We needed the glass walls to be able to withstand ‘missile impact’ from things like picnic tables and trash cans flying into them, thereby opening the structure to pressure in a violent storm,” Ducharme says. FM Global engineered the glass so that it will resist breaking if a picnic table hurtles toward it from 10 yards away.
With regard to flood risk, the insurer developed pre-engineered aluminum flood doors framed with rubber gaskets that could be screwed into the entrances of the stadium in 30 minutes in advance of an emergency. “The gaskets make them watertight,” Ducharme notes.
FM Global also had recommendations for the builders of the new stadiums housing the Seattle Mariners and Minnesota Twins, among others. “We’ve got six clubs from Seattle to San Diego located in earthquake-prone regions, and we ensure they have the right seismic protections,” Ducharme adds.
CFO Mariner has good feelings about the relationship with FM Global. (In fact, he recently joined the insurer’s board.) “Most insurance companies employ teams of actuaries who review losses and figure out claims losses and charge accordingly,” he says. “FM Global, on the other hand, employs engineers who determine potential losses based on both actuarial science and loss engineering. It was a perfect fit.”
Sounds like a home run.