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It's not a lack of water but too much of it that is affecting courses in the Southeast United States. After the 2004 and 2005 hurricane seasons, insurance rates are going up, way up in some cases. Courses, particularly in Florida, are struggling to find any coverage at all. Most are unable to find protection from tree loss or wind, which is the third-most common claim from golf courses.

"A lot of insurance companies have started pulling out of coastal areas because of the weather-related risk," said Jay Karen, director for the National Golf Course Owners Association, which represents 4,500 courses nationwide.

"There are people who are always willing to write a business, but they're either going to be offshore or you're going to have to pay a higher premium for a higher risk insurance policy." For those lucky enough to find coverage, costs are going to skyrocket. "It's a big issue," said Karen.

Courses in Florida, the U.S. golf mecca, appear to be bearing the brunt of the increases. The situation is so tight, said Joel Willis Jr., program director for Clubsurance, through the Commonwealth Insurance Group, that some courses there are turning to self-insurance.

"Rates are going up 80 percent to 200 percent," he said. "It's less coverage, and they don't get all of the added bonuses."

Many coastal courses used to buy multimillion-dollar, tee-to-green policies to cover the damage from uprooted trees and their subsequent repair. That's no longer the case.

"A lot of that coverage is going away or being capped at $250,000 on coastal property," Willis said.

FEELING WINDED

A client in Naples with a high-end course, for example, who was previously insured by Zurich Financial Services for both property and tree coverage, was hit with savage restrictions. When this client tried to renew the policy this year, he was told the contract would no longer cover trees and that policy would now carry a $750,000 deductible. And this Naples-based client was lucky.

Many underwriters are outright refusing to issue policies in hurricane-prone areas. Safeco Insurance is not renewing property coverage for any golf-course clients in Florida, but the company will continue to offer general liability coverage to those courses. St. Paul Travelers, which writes about 1,400 golf courses nationwide, has raised deductibles and modified coverage for wind and business-interruption policies in coastal areas.

Tom Duggins, the managing director of national programs for Travelers' Eagle 3 division, said the company also will not insure courses located on islands, such as Hilton Head, S.C.

"New Orleans showed us that, because of sustained flooding, business-interruption loss could be a great deal more than companies had previously anticipated," he said. "Everybody just looked at the Atlantic and the Gulf, but now after what happened in New Orleans, you have to look (at golf courses) near rivers and lakes as well."

When it comes to wind insurance, Willis said most courses are simply out of luck.

"If you're fortunate enough to get wind--and a lot of them are excluding it now--you're now looking at a 5 percent to 10 percent wind deductible," he said.

Arrowhead General Insurance, for example, plans to discontinue writing wind policies for the area this year, and International Catastrophe Insurance Managers has decided to write nonstandard policies for wind in some of the hurricane-prone states. Agents, such as Bollinger Insurance, are also cutting back on their offerings to coastal golf courses.

Nor is tree coverage widely available.

In South Carolina, where Willis is based, golf courses are anxiously awaiting the next big storm. "We haven't been hit since Hurricane Hugo in 1989, so really we're due," he said.

DRIVING FOR ALTERNATIVES

Because insurers are starting to eliminate wind insurance in South Carolina, too, many courses are going to the state-backed insurance fund, the South Carolina Wind Pool.

"In South Carolina, we still have regional carriers that will put a 5 percent wind deductible on property," Willis said. "But in Florida, if they can't find wind, they're basically paying for fire insurance for the clubhouse."

Although other policies, such as business-interruption insurance, can help some companies during a storm, it can't provide the same protection for a golf course.

"With a golf course, it's a little different animal," Willis said. "If a storm comes through and wipes out the clubhouse and takes a lot of trees down, that course is only going to be closed for as long as they can get the trees off the fairways. They'll put a trailer out and run tee times out of that. I remember seeing a lot of that going on in Mississippi last year. They can be up and running pretty quickly."

Karen said his association created a program to help golf courses handle inclement weather. This adverse-weather policy, similar to business-interruption insurance, allowed courses to purchase a policy for a certain number of rainout days each year. The deductible was based on official weather data, and once the deductible was met, the courses recouped their losses. But after a three-year trial, the program was discontinued due to a lack of participation.

"There wasn't good enough [weather] data to predict the next year," he said. "I guess [course owners] thought it was kind of a gamble and didn't want to take on another insurance policy."

But Willis also said he doesn't expect the challenges golf-course owners now face to last forever.

"It seems like in the insurance industry, and in America in general, we tend to forget things pretty quickly," he said. "If we don't have a bad hurricane season, there are going to be a lot of players in the market again next year. Then we'll get hit, run out of the market and take big losses."

In the 1980s, golf courses had few insurance options. Most purchased just the standard property liability policy. But as the industry expanded, more options became available, allowing course owners to protect themselves from wind, floods, tree damage and earthquakes.

In the last few years, catastrophic weather has had a major impact on insurance for the golf industry. With carriers paying back-to-back claims from deadly hurricane seasons in 2004 and 2005, insurance companies are under pressure to restrict terms, raise deductibles and insist that golf course owners take on more of the risk.

Policies offered to the industry appear to be reverting back to the basics. Few insurance companies are providing flood and tree coverage, and fewer still are issuing policies to cover wind damage. For courses in the Southeast, simply finding a carrier is issue enough--forget about those policy extras.

DIFFERENT CAT, SAME TRAP

While golf courses in inland Southern California may not face the same hurricane threats like those in the Southeast, owners do worry about the impending earthquake threat from the San Andreas Fault, which runs through the center of the Coachella Valley.

Between storms in Florida taxing the catastrophe insurance market and the speculation that the next "big one" will crack open Southern California, the coverage is becoming more expensive.

"We have some earthquake coverage, but there is usually a limit," said J.D. Ebersberger, chief operating officer and golf director of The Palms Golf Club in La Quinta, Calif. "They'll usually either come up with some dollar amount, maybe $1 million dollars for the whole property, even if your place is worth $17 million."

Ebersberger said he carries minimal coverage for his course--just enough to protect his buildings. But at his paired-down country club with a modestly sized clubhouse, he said he hasn't been actively pursuing better coverage as it would surely mean higher fees to members. For Ebersberger, the answer is to retain more risk.

"The cost basically doesn't warrant it," he said. "If I'm going to get these coverages . . . how much of an increase in dues for members is it going to be? A certain amount will be the breaking point, and we'll lose members. In turn, you take some risks. With an equity club owned by members, it's up to them if they want to pony up. For them, they're more concerned about the condition of the course and amenities (than the protection)."

Paul Lewis, one of the principal owners of Desert Empire Insurance Services in Palm Desert, Calif., which insures more than 100 golf courses in Southern California, said some of his clients opt for earthquake sprinkler-leakage coverage as one additional protection from earthquakes.

He also said he continues to write other types of earthquake protection policies, but that he is one of the few that does so. Not surprisingly, it comes at a cost.

"Right now, we're seeing the earthquake rates increase dramatically," he said. "The claims that come out of the hurricanes basically affect the whole catastrophe market. The biggest

challenge (in California) is to keep those earthquake rates in line. If they lose money in the hurricanes, when rates go up, they go up on all lines with catastrophe insurance."

Similar to the challenges faced by Southeast courses, golf course owners in California are also finding tree coverage hard to find.

Most insurers today are limiting tree coverage or eliminating it altogether.

Ebersberger at The Palms said his club can only get $50,000 in tree coverage these days. That leaves courses open to a lot of exposure.

The Palms has more than 2,000 date palms, costing an average of $2,500 per tree, and another 1,000 mesquite trees lining the fairways and greens. Ebersberger said the club would be devastated if a storm wiped out his trees.

"We would have opted to make a brand new course," he said. "Something like that . . . it can destroy you."

Rick Sigel, the senior vice president of the western region for broker Acordia Inc., based in Chicago, said carriers have reduced tree coverage throughout the nation in response to the losses reported after the past two hurricane seasons.

"The course that keeps trees trimmed properly on an annual basis is going to protect itself much better," Sigel said. "I think courses are going to have to find ways to protect themselves. Proper maintenance helps . . . and just being aware of the exposure."

HANDICAPPED GROWTH

Facing higher premiums, some golf courses may find themselves in an economic pinch. The weather is partly to blame. But so is the golf industry itself, which wants to grow despite few golfers.

More viewers may be watching golf on television, but when it comes to teeing it up, industry growth is flat.

Despite this, courses continue to be built not to meet the demand in new golfers who would offset a course's insurance premium by paying fees, but to increase prices of homes located on courses.

"Participation in the game has been relatively flat for a number of years now despite the increase in popularity on television," said Karen.

"The supply and demand is out of balance," Karen added. "We're now at net zero growth. It's more difficult to run profitable operations."

Golf is grappling with an abundance of courses that were constructed during the golf boom that began in 1989, said Chad Ritterbusch, the executive secretary of the American Society of Golf Course Architects.

"Within a year or two, the number of golfers went from 20 million to 25 million," he said. "It was just a huge increase in a very short amount of time. What happened in the 1990s then was a huge catch-up. We had this increase of 25 percent on the demand side, but it takes a while to build golf courses."

After a decade of trying to satisfy that pent-up demand, the number of golfers stayed flat. Growth in the number of courses continues, however.

According to the National Golf Foundation, there are more than 27 million golfers in the United States today.

At the beginning of 2005, the foundation reported, there were also more than 700 golf courses in various stages of construction and another 250 proposed.

While Southern states will likely have an increase of Baby Boomers fleeing cold northern weather for the balmy climate and tree-lined golf courses of the Sun Belt, professionals in the golf industry just believe the growth will shift, causing northern courses to be the ones to suffer.

For older facilities such as The Club at Morningside in Rancho Mirage, Calif., built in 1982 as the first Jack Nicholas-designed course in the Palm Springs area, attracting a new, young crop of members is even more difficult.

Ben Vann, superintendent at The Club at Morningside, said every course in the area is competing for new members.

"I know for a fact that memberships around the area, particularly for older clubs, are becoming more and more of a challenge," he said. "We run these operations as efficiently as possible, but you have to try to beat your neighbor around here."

The drop in profits because of fewer greens fees and more competition is only having the effect of forcing some courses to open themselves up even more to weather-related exposures due to the lower maximum coverage available and higher deductibles.

ANGELA CHILDERS lives in Chicago.

October 1, 2006

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