Sawmill Insurance Coverage Getting More Difficult to Secure

Sawmill operators have always operated in a supply and demand market. Currently, however, they are dealing with another and somewhat unfamiliar supply and demand problem: the lack of insurance companies willing to write policies covering their property, as well as business interruption insurance. Sawmills are also now dealing with significantly higher deductibles.

Insurance industry experts say that insurance capacity has shrunk as the lumber sector continues to experience significant losses, with large fire losses and ongoing concern. As a result, lumber sector insurers have been struggling with profitability and many have exited the market, creating the ongoing supply and demand issues, which show no signs of improving anytime soon.

Sean Briscoe, assistant vice president-underwriting at Pennsylvania Lumbermens Mutual Insurance Co., a company that has been insuring the lumber and woodworking industry for 126-years, said sawmill insurance is a severity-driven business.

“It’s tough. You have fewer insurers that want to come into the niche and write the exposures because of the losses. Briscoe went onto say, that a sawmill’s total insured value and heavy fire loads mean that insurers are taking on significant exposures.”

Adding, “If you do have a loss, it’s normally going to be a large loss upwards of $100,000, sometimes a couple of million dollars. When insurers think about that they have to weigh whether the risk is worth the reward for writing this type of business.”