insuring players

[soxfan420]

why are the sox so hessitant to long term deals for big money, last i heard you could insure them, so y not insure them and if they get hurt you dont have to pay them has much. but if healthy you pay them what they signed for.

[Soxbadger]

This may have been a dream, but I read some where that they can be insured for only 3 years.

 

Probably to much of a risk for insurance companies after that.

 

SB

[Gene Honda Civic]

I don't know the details --- i don't know about insurance length -- it could be that over a given period of time, insurance just isn't cost effective anymore...

 

But look at Baltimore last year they were still paying Albert Belle....

[SoxFan562004]

Insurance use to be a hot thing, but the insurance companies got burned on some big contracts so it is REALLY hard to get insurance and if you can the premiums are huge... Actually some professional wrestlers still get some from Lloyd's of London, but again the premiums are high

[YASNY]

I don't know the details --- i don't know about insurance length -- it could be that over a given period of time, insurance just isn't cost effective anymore...

 

But look at Baltimore last year they were still paying Albert Belle....

Insurance was paying a large percentage of Belle's deal. That is an example of the one of those that the insurance company got burned on.

[southsider2k5]

This may have been a dream, but I read some where that they can be insured for only 3 years.

 

Probably to much of a risk for insurance companies after that.

 

SB

Lloyds of London will only insure a pitchers contract for 3 years, and many players they set $ amounts that they won't insure above that number. IIRC most of the ARod contract is uninsured.

[Steff]

Insurance was paying a large percentage of Belle's deal.  That is an example of the one of those that the insurance company got burned on.

Exactly right YAS. The second the insurance co realized they were liable for 80%... EIGHTY PERCENT, of his remaining contract.. the cost to insure contracts more than doubled. I think the max time now is only 2 years and only up to 50% of the contract worth, and there is a $$ amount not to exceed as well.

[YASNY]

Exactly right YAS. The second the insurance co realized they were liable for 80%... EIGHTY PERCENT, of his remaining contract.. the cost to insure contracts more than doubled. I think the max time now is only 2 years and only up to 50% of the contract worth, and there is a $$ amount not to exceed as well.

Which, in turn, is one of the driving forces that is keeping these salaries under control. The owners, in general, have gotten smarter about the way they do things and there is certainly a market correction going on, but this insurance thing is also part of the equation.

[Bridgeport_Joe]

Couple of things:

 

1.) People are adhering to the common misperception of Lloyds. It's not an insurance company. It's basically a reinsurance market. In the baseball player context, a (usually American--in general, companies writing direct insurance must be domiciled and licensed in a particular state) company will write a policy, then reinsure it through Lloyds. This means that Lloyds will essentially hold an auction, whereby members (called syndicates) will be able to sign on to reinsure a portion or all of the insurance policy in exchange for a percentage of the premiums. Sometimes, the syndicates will be de facto primary insurance companies, because the American insurer will pass on the entire risk (usually insurers keep 5%-20% of the risk on their books) and the entire premium (minus a 50 bp or so commission).

 

2.) The sports reinsurance marketplace is in a significant amount of flux right now. To make a long story short, salary escalation in the baseball and European football markets really killed insurers and reinsurers in the 1990s. Heck, I'm working on a case right now involving a reinsurer (actually reinsurance pool, but that's a different story) that suffered mid nine figure losses, much of which was attributed to these markets (they actually reinsured Thomas's contract, and got hit pretty hard in 2001), and refused to pay the Chicago company that directly issued the policies. As a result, you simply can't find syndicate members or any other reinsurers that are willing to sign on to any policy extending past three years, unless the most common injuries (e.g., injuries relating to a pitcher's arm) are excluded from coverage, with the net result being no company will be foolish enough to write coverage for these long term policies, knowing they can't obtain reinsurance protection. With salaries coming back down, I expect this to change in the next three or four years--meaning if a team is willing to gamble, they could sign a player to a long term deal, then try to get insurance in a year or two. But this is just a guess.

[BrandoFan]

Couple of things:

 

1.) People are adhering to the common misperception of Lloyds.  It's not an insurance company.  It's basically a reinsurance market.  In the baseball player context, a (usually American--in general, companies writing direct insurance must be domiciled and licensed in a particular state) company will write a policy, then reinsure it through Lloyds.  This means that Lloyds will essentially hold an auction, whereby members (called syndicates) will be able to sign on to reinsure a portion or all of the insurance policy in exchange for a percentage of the premiums.  Sometimes, the syndicates will be de facto primary insurance companies, because the American insurer will pass on the entire risk (usually insurers keep 5%-20% of the risk on their books) and the entire premium (minus a 50 bp or so commission).

 

2.) The sports reinsurance marketplace is in a significant amount of flux right now.  To make a long story short, salary escalation in the baseball and European football markets really killed insurers and reinsurers in the 1990s.  Heck, I'm working on a case right now involving a reinsurer (actually reinsurance pool, but that's a different story) that suffered mid nine figure losses, much of which was attributed to these markets (they actually reinsured Thomas's contract, and got hit pretty hard in 2001), and refused to pay the Chicago company that directly issued the policies.  As a result, you simply can't find syndicate members or any other reinsurers that are willing to sign on to any policy extending past three years, unless the most common injuries (e.g., injuries relating to a pitcher's arm) are excluded from coverage, with the net result being no company will be foolish enough to write coverage for these long term policies, knowing they can't obtain reinsurance protection.  With salaries coming back down, I expect this to change in the next three or four years--meaning if a team is willing to gamble, they could sign a player to a long term deal, then try to get insurance in a year or two.  But this is just a guess.

Now THAT's a University of Chicago education!

 

Good to see you post, Joe.

[Bridgeport_Joe]

Good to see you post, Joe.

 

Thanks, though I'm afraid I'm at a disadvantage of not knowing the name you posted under on the ESPN boards. I was just chirping in about the intersection of baseball, the insurance market, and the law--one of the very few things I know anything about. It was pretty interesting a month or so ago--in the course of a case I'm working on, I had to review lots of baseball policies, including Thomas's. I found out a good bit about various injuries or chronic conditions that different players have that aren't public knowledge. In at least one case, it shed some light on a trade that was never made.

 

I've been extraordinarily busy at work and doing other stuff the past few months, so I haven't really been posting that much anywhere. With the holidays approaching, though, I should have a little more free time.

[BrandoFan]

Thanks, though I'm afraid I'm at a disadvantage of not knowing the name you posted under on the ESPN boards

.

 

Meh, ancient history. Wouldn't know me unless you were around and loved the JustJim/FarWestChicago/MaidenVoyage/Rdivaldi/Huskers era.

 

I found out a good bit about various injuries or chronic conditions that different players have that aren't public knowledge. In at least one case, it shed some light on a trade that was never made.

 

KochKonerkoWright....cough-caugh.

 

I've been extraordinarily busy at work and doing other stuff the past few months, so I haven't really been posting that much anywhere. With the holidays approaching, though, I should have a little more free time

 

Great to hear that, you're an asset to this board.