Insurance costs force entry fee rise
It should come as no surprise that the insurance costs clubs face to run their events will be increasing in 2022 and the ACU have released a document to all clubs and centres detailing the reasons for the increased costs which we repeat here in case riders and officials haven’t yet picked this up from their e-mails.
The insurance matrix indicates that riders face an overall increase of the entry fees per event by a minimum of £2.00. The insurance increase is £1.50 and the Northern Centre decided at the last Centre Board meeting that the 50p Centre levy should be reinstated after a lapse of several years. The Centre has lost money over the past two years, so there is a need to reinstate this levy to help mitigate the loss suffered.
Below is the ACU statement in full which clearly explains the reasoning behind the increase..
ACU 2022 Insurance Rates
Attached are the details of the ACU insurance charges that will take effect from 1st January 2022. The fact that it has been necessary to increase rates we are sure will come as no surprise to those who follow the financial news that has been reporting constantly on the problems in the insurance market.
Due to the difficulties and the effect on premiums particularly for the considered higher risk activities, the ACU Directors felt it would be appropriate to provide a more in-depth summary of the main issues which are shown below. These take the form of the key matters that affect the market as a whole followed by the direct consequences for the ACU and its membership.
What has caused the hard Insurance Market?
These market conditions are not specific to ACU activity, they apply to all policyholders, with some being impacted even more severely than others.
Specifically the current hard market conditions arise from a number of contributing factors.
- Impact of reduced investment returns and low interest rates. Historically insurers have used investment returns to offset underwriting losses. This hasn’t been possible since interest rates have been at the low levels seen in recent years. Insurers are therefore seeking rate increases to achieve underwriting profit.
- Reduction in market capacity. Insurers withdrawing capacity to de-risk their book forces up pricing and makes terms more restrictive amongst insurers still willing to provide cover.
- Increased cost of reinsurance and restrictions imposed by reinsurers. Reinsurance is a key component of an insurer’s pricing model. Reinsurance rates are increasing significantly, and commercial insurers will have no option other than to reflect these increases in their rates.
- Increased frequency and severity of natural catastrophe claims. The rise in attritional losses continues to impact the insurance industry.
- Increased frequency and cost of class action claims. Self- explanatory
- Claims inflation. Claims costs are increasing at a far greater rate than general inflation. This means insurers have to increase premiums to compensate.
- Regulatory intervention. Since 2016 insurers’ spare capital requirements have more than doubled. This has caused a number of insurers to leave the market whilst others have significantly reduced their capacity.
How has this affected the ACU?
Motor sport is considered “high risk” by the insurance market and as such only a few selective insurers have been prepared to offer cover.
In August 2021 we were notified that one of our key insurers for the past 10 years would not be offering renewal terms having decided to withdraw from the motor sport sector. Since that time we have been in discussions with our Insurance Broker, Lockton, to secure an acceptable replacement.
This has proven to be a long and arduous process due to the overall lack of appetite and the fact that as the Governing Body for Motorcycle activity the ACU have a duty to all its competitors, officials and membership to provide the robust and reliable level of insurance that has come to be expected and indeed represents the level of risk.
We are naturally now pleased to announce that we have secured appropriate insurance cover which is now in place for the coming year, but the cost of our Public Liability cover has increased significantly. Unfortunately, the extent of the increase (close to a seven figure sum) is such that reluctantly Directors have no alternative other than to increase insurance rates for the forthcoming year. These increases have been kept to the absolute minimum only aimed at covering the outlay required.
We believe it is the riders who benefit from our sport and these increases should be passed onto them and not absorbed by organisers so, to assist clubs when preparing for events in the coming year, attached are the per capita insurance rates for our 2022 premier cover plus basic rates so they can be taken into consideration when setting entry fees for your events in the coming season.
We thank you for your understanding in what is a very difficult financial climate.