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Jonathan Thomas is a popular luncheon guest and an A-lister for many social gatherings in London. Partly it's because he's volubly outgoing and charming. And it's partly because of his job.

Thomas, at 44, has one of the highest profile positions in the insurance world today. He's Lloyd's celebrity/body parts active underwriter.

On one occasion, Thomas wrote a policy for Princess Diana. Adding a footnote to the lore of the storied royal family member, Thomas confided to Risk & Insurance®:"I once insured Princess Diana because a South African soap commercial utilized a look-alike!"

In another instance, Thomas created a policy covering the loss of chest hair on an unnamed male model. A valid claim would have required that the insured, in the opinion of two independent medical consultants, suffered a loss of more than 85 percent of the hair covering the front part of his torso.

In yet another case, Thomas insured the legs of statuesque model Heidi Klum, but only in a one-shot situation. "Braun had an insurable interest in her legs for an ad contract when she endorsed its epilator product."

Thomas is a dedicated statistician as active underwriter of a group he founded in 1998, Thomas Syndicate 1607, a Lloyd's syndicate managed by Creechurch Underwriting Ltd. and a leader in London Market accident and health insurance. But in making celebrity/body parts decisions, Thomas also must possess the steely, nervy instincts of an experienced gambler.

There's perhaps no better example of this than when Thomas and his group considered insuring Mark McGwire's fragile ankle as an exclusion during the St. Louis Cardinal's record-setting home-run season. After examining medical data in similar cases and other sources of applicable information, Thomas and his group forged ahead and wrote a policy, paid for by McGwire's ball club, to cover the slugger's problematic ankle--but only for that one year.

For millions of baseball fans, that season became a historic landmark when McGwire belted his legendary 70th homerun. And it was a good season for Lloyd's, as well. "We came clean on that one," says Thomas. But that was the last policy Thomas and his group wrote on McGwire. "We felt that an accumulation of stresses on him could lead to unforeseen deterioration of other parts of his body," says Thomas.

Which turned out to be prescient, because after hitting 65 home runs in 152 games the following year, McGwire's playing time and home-run production fell off dramatically in the next two seasons, after which he retired.

The McGwire case furnishes an insider's look at how Thomas' group calculates risk and arrives at overall policy decisions. "The underwriting process and rating on these unrepeatable types of cover involves extrapolation from medical data about failure rates on reconstructions of similar tissues," says Thomas.

"These rates are then typically loaded for the additional wear and tear put out by a pro athlete. Contingency and profit loads sit atop this to ensure the variance from the law of large numbers operating across this thinly insured population.

"Risk selection is driven by physical and moral hazard," adds Thomas. "Players at the end of their careers are less good risks, as are players in high-contact positions. Similarly, celebrities with problem pasts due to sickness or criminality are less good risks."

Moral hazard, says Thomas, "is everything in sports disability." It is associated with the financial circumstances conducive to making a fraudulent insurance claim. "We always try to ensure that no player is better off claiming than continuing to play."

Many star athletes are not as fortunate as McGwire in receiving team financial backing for body-parts coverage. Future Hall of Fame baseball player Juan Gonzales, while a free agent, reportedly bought a $50-million personal liability policy that was designed to go with him to whichever team signed him, thereby offering assurances to those concerned about his history of back troubles. In the end, he signed again with his former team, the Texas Rangers.

Stars in professional football, where there are no guaranteed contracts, have been known to pay for their own coverage. Kurt Warner, for one, purchased a policy immediately after he took over the all-important position of starting quarterback with the St. Louis Rams.

Then there's British soccer superstar David Beckham, who is insured in so many ways, beyond just coverage for his legs and feet, that even he probably doesn't know how much all the policies are worth.

"There are so many groups with an insurable interest in Beckham that it is impossible to know what the final bill might be if he were ever permanently injured," Thomas observes.

Has Thomas ever taken a pass on insuring a celebrity? Yes, and that turned out to be a good call. Michael Schumacher, the hugely successful Formula One race-car driver, was reportedly paid several million pounds when he broke his leg in 1999 and couldn't race. "Schumacher was a risk I declined in previous years because of pricing," notes Thomas.

In all instances, Thomas is very wary of anything that smacks of a publicity stunt. "There must be a risk-transfer element," he emphasizes. "That is the law."

He says that deductibles are seldom used in body-parts policies unless there is an exclusion-buyback policy in which temporary disability is covered and so a waiting period is commonly specified.

"Coverage is usually total loss, or loss of use (that is, all or nothing) or a stated minimum of scarring or other damage to qualify as disfigurement," he says.

Policies that Thomas and his group write are rarely for more than a year, he says, "but renewal is anticipated and the short career span of sports stars and celebrities means significant portions of their useful life are covered.

"They are like factory machines in that sense," he adds. "Comparatively few don't get worn out. As a consequence, a rating can change considerably from year to year on disability as opposed to body parts."

As a result, says Thomas, due to the small insured population involved, his ratings lean heavily on extrapolation from Lloyd's extensive market norms for more statistically significant samples.

Today Lloyd's dominates the celebrity/body parts domain.

But that wasn't always so. In the silent-screen era, Fireman's Fund, with its extensive Hollywood connections, was the big player. Most notably, Fireman's insured Douglas Fairbanks Sr.'s profile, in what became known as the "scar policy."

But as silent movies faded away, Firemen's bowed out, and in barreled Lloyd's. And thus began a cavalcade of widely known celebrities who insured various parts of their anatomy, a practice that gained worldwide attention through the insuring of Betty Grable's legs.

Lloyd's historic list of celebrities covered includes, among many others:

- Jimmy "Schnozzle" Durante, singer and actor, insured his nose.

- Dancer Rudolph Nureyev's legs were insured for 190,000 pounds.

- Bette Davis insured her waistline against expansion.

- In a timely move, Olivia de Havilland's jaw was insured just before being socked by Ray Milland in a film shoot.

- Not to be outdone by Betty Grable, Marlene Dietrich insured her legs, though not for $1 million.

- Composer Richard Stockler insured his ears.

- And noted food critic Egon Ronay's taste buds were insured against all risks.

Other stars who reportedly insured various parts of their anatomy through the years include Mae West, Elizabeth Taylor, Bob Hope, Frank Sinatra, Richard Burton, Gene Kelly and Sir Laurence Olivier.

Musicians who reputedly insured their voices count Bob Dylan, Rod Stewart, the Rolling Stones, Bruce Springsteen, and, as you would guess, the Beatles, starting with their first tour of the United States.

But it's not always just big-name celebrities who have turned to Lloyd's over the years.

There was an eminent professional Fat Lady in the 1920s who found it prudent to insure against growing thin, not to mention the 40 members of the "Whiskers Club" in Derbyshire, each of whom insured their beards for 20 pounds against "fire and theft." And there was the policy written for the Frenchman attempting to cross the English Channel in a bathtub. Happily for both the insured and the insurer, the crossing was successful.

There's no question that Thomas' celebrity/body parts business activity generates great press attention for Lloyd's. But at the end of the day, does this specialty line make money? "Yes," Thomas replies unequivocally.

In a telephone interview, Risk & Insurance®had a few remaining questions for Thomas.

But he had to politely excuse himself. He was already late for lunch at a restaurant in London's fashionable West End.

STEVE YAHN, a former editor and publisher, contributes frequently to Risk & Insurance®.

April 15, 2005

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