BI policies play big role in Miss. casino recovery.

Just two months before the most devastating hurricane in U.S. history slammed its shores, the City of Biloxi, Miss., purchased an insurance policy to protect against revenue losses should a storm or hurricane close down its casinos.

For a coastal city that derives a third of its annual operating tax revenue from the gambling industry--roughly $20 million annually--the business-interruption insurance was clearly long overdue.

Through Stewart Sneed Hewes, a regional brokerage firm and subsidiary of BancorpSouth Insurance, the city consulted with insurers around the world, including Lloyd's of London and firms in the Bermuda market, until it finally settled on a $10 million policy with a $92,000 annual premium.

L. Wayne Tisdale, an executive vice president at Stewart Sneed, said the original plan was to find a business-interruption policy separate from the city's property coverage.

It was a combination of London and U.S. underwriters that issued Biloxi's first-ever business-interruption policy, covering 50%, or six months, of total annual tax revenues.

At least nine Gulf Coast casinos, including seven in Biloxi, sustained heavy damage as a result of Katrina.

Like the City of Biloxi, business-interruption and property insurance coverages held by the casino operators could be the difference between a total loss and partial recovery of significant losses.

Some still may face significant disputes with their claims, said Franklin Horowitz, a long-time adjuster and chief executive of Claims International.

"When you wrote the insurance for your casino, how did you describe it? Was it a vehicle or a building? How exactly were you berthed into the levee? If it's not characterized right, there's going to be disputes, and people are going to file errors and omission claims against brokers. If they did insure it right, we still have one big issue to settle, and that is what caused the damage? Was it wind or was it flood?"

By state law, gambling operations have to be on water, even though many are affixed into the sea floor and attached to land-based hotels. The Grand Casino Biloxi, a 134,000-square-foot multistory barge, for example, was dislodged by the hurricane's powerful wind and carried across the beach onto land. Harrah's Entertainment Inc., which owns Grand Casino Biloxi, has business interruption and property damage insurance covering each of its three affected properties.

Top 5 Writers, Mississippi,
Commercial Multiperil, 2004
Group market shares (%) are based on direct
premiums written.

Zurich Financial          14.91
St. Paul Travelers Cos.   13.53
Nationwide                 6.98
State Farm                 6.76
W.R. Berkley               5.99

Source: Best's State/Line Reports

Note: Table made from bar graph.