Guiding caravan parks through a hard market cycle

When the Insuring Caravan Parks industry roadmap was released in July 2023 by the Caravan Industry Association of Australia (CIAA), it represented a long-awaited end — or at least a hopeful, new beginning — to one of the most difficult chapters the caravan park, campground and adventure space had ever faced.

Insurers had been abandoning the sector, scared off by stories of bushfires, floods, cyclones and the perception of risk coming from various park inclusions such as water slides and jumping pillows.

At the same time, following a long, pre-COVID period of relatively low premiums and simplified risk-mitigation strategies by business operators, market behaviours and expectations were suddenly out of sync.

Caravan park businesses were often not stringent enough with risk assessments, and premiums rose to unaffordable levels.

When ANZIIF reported on this issue in late 2022, one award-winning park in Queensland had just seen its premium leap from A$150,000 to A$980,000.

As a workaround, some caravan parks began referring to their businesses as ‘cabin parks’ to find cover, the Insuring Caravan Parks document said, highlighting the inconsistency in the evaluation process.

What’s in the Insuring Caravan Parks report?

The Insuring Caravan Parks strategic document covers a great deal of ground — as expected for a sector which generates A$2.7 billion in annual revenue.

In 2022, over 38.5 million visitor nights were spent in caravan parks across Australia, resulting in an overall A$27.1 billion economic impact across park revenues, trade, and the broader visitor economy.

Meanwhile, in the past two years, Australia has experienced an unusually high frequency of catastrophic events.

As highlighted in the report, the flooding event in Southeast Queensland and New South Wales in February 2022 ‘has emerged as the most financially impactful insurance catastrophe in Australia’s history’, resulting in more than 239,000 claims, with current estimates reaching AU$5.7 billion.

The roadmap, in collaboration with government, insurers and broker groups, identified five key strategic focus areas:

• creation of a robust and accurate analysis of current risk
• establishment of connections between caravan park risk mitigation strategies and insurance-endorsed industry accreditation programs, ensuring they are audited impartially
• implementation of universally applicable technological solutions to facilitate standardised reporting of risk mitigation strategies and actions
• standardisation of risk profiling by caravan parks, to ensure compatibility with the requirements of the insurance industry
• increased education to the insurance sector about the unique attributes of caravan parks

“There’s now a far broader appreciation for the hard market cycle in which we find ourselves,” says Luke Chippindale, general manager of government relations and corporate communications with the CIAA.

“There have been efforts by Austrade to develop briefing sessions with brokers, the Insurance Council of Australia and others. That’s for a good number of industries across accommodation, recreation, outdoors, etc.

“There has also been movement by Treasury, in particular by Stephen Jones, Assistant Treasurer and Minister for Financial Services, towards discussions with international underwriters.

There is an understanding that we need higher-level discussions around where Australia sits in terms of its market cycle. Those conversations help drive a more positive narrative around how we view risk and our appreciation mitigation measures.”

Chippindale points out that the Insuring Caravan Parks roadmap signifies a “different turn” taken by the CIAA; a turn that doesn’t involve consistently criticising the insurance industry.

“We recognised that we needed to play a role in it, and that was through a data-led viewpoint,” he says.

“We need to work with specialist brokers. We need to work with people that understand our industry. And we need to be better at articulating our industry.”

Seeking solutions for a big capacity problem

During a period in which many insurers leaned away from the caravan and camping space, All Parks Insurance leaned in instead.

In what was often an environment of anger around a lack of acceptable outcomes, the company’s CEO, Julie Pernecker, sought solutions.

“It has been a two-year battle between insurers and the Caravan Industry Association,” says Pernecker.

“During that time, at All Parks Insurance we’ve been trying to build capacity.

“When some of the caravan parks went to the media, they thought they were doing the right thing. But often that ended up unravelling all the work we’d been doing. You don’t want to scare the industry.”

Few insurers know the holiday park space as well as Pernecker does — having specialised in it for over two decades.

“The brokers I’ve dealt with for 20-plus years have never seen a market like this,” she says.

“We were in a position where there were risks that just couldn’t be placed. You had to go overseas to unauthorised foreign insurers to get any form of cover.

“I’d always tell clients that if they can get cover, that’s one hurdle. But the next hurdle is, can you afford it?”

Finding markets for the risks

As insurers were pulling away, Pernecker and her colleagues hunted down new markets for every risk.

This mostly involved educating insurers in the new markets, who’d typically been spooked by the fact that Australia is perceived as a hotspot for fires, floods, and other CAT exposures.

“A lot of my clients had been with me for eight to 10 years, and suddenly we didn’t have a market,” she says. “When we did find the markets, the premium pricing was very different.”

Pernecker warns that the increases in cost will be sustained across more than one renewal.

“The cycle is not going anywhere, anytime soon,” she says. “I think there’s at least another 18 months of this before it stops to take a breath.”

Much of the success in finding new markets came from physically introducing foreign insurers to the parks they were covering.

“I’ve had property and liability insurers from London come out and go through the holiday parks,” says Pernecker. “They were just taken aback by the quality of what they saw.

"The property insurers said they felt bemused staying at a hotel when they could be staying in these cabins and just walking out onto the beach.

“In this industry, when you’re given an opportunity to work with insurers that want to work with you and build strong capacity for the industry, everybody’s a winner. All we have to do is work together."

A new sense of balance

While there are still issues, there is a new sense of balance in the caravan, campground and outdoor sector.

“We’ve seen capital come back into the market,” says Chippindale. “We’re seeing more insurers and brokers coming back to support and pursue policies again, which is fantastic. But we’ve still got a lot of work to do on ourselves.

“We’re a long way away from it being a normalised or a new standard market, and what’s important in this moment, is that operators talk only to specialist brokers in this field. But we’re in a much better place, partly because of the new base that we’re building from.”

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