Forest & logging: Challenges and opportunities amid a complex market

Forest & logging: Challenges and opportunities amid a complex market | Insurance Business America

Forest & logging: Challenges and opportunities amid a complex market

This article was produced in partnership with Victor Insurance Managers Inc.

Gia Snape, of Insurance Business, sat down with Peter Elmalis, underwriting program manager, forest & logging at Victor, to talk about market conditions for the forest and logging industry and opportunities for agents serving this space.

From logging in dense forests to hauling timber to the mill, the forest and logging industry contains many risks that require specialized knowledge and care. Amid high inflation and tight capacity, forest and logging insurance is under many of the same pressures as the rest of the insurance industry.

“What exaggerates the difficulties in this space is that, unlike other industries where there are a multitude of carriers, forest and logging has seen a lot of players exit the market,” said Peter Elmalis (pictured), underwriting program manager of forest & logging, Victor.

The program manager said he has seen “a lot of volatility” in the space but nothing like the attrition in the past few years.

The boom in home construction projects during the COVID-19 pandemic led to increased demand for lumber and forest products, which helped keep logging businesses afloat. But larger claims activity in the space has resulted in high rates and decreased capacity from insurers. Commercial auto coverage is key to forest and logging, which means claims can run considerably large.

“Up until five or six years ago, many carriers and program administrators were interested in soliciting and actively writing this business. Opportunities have continued to shrink in terms of carrier and program interest and capacity,” Elmalis told Insurance Business.

“From a profitability standpoint, the results can be less than superior, which is why many of these carriers and programs have a hard time sustaining themselves in the marketplace and obtaining the additional reinsurance support they need. We’ve probably shrunk even further in the last year or two. It’s put even more pressure on rates and available capacity.”

Current challenges

The Victor Forest & Logging program stands out for its comprehensive underwriting and service in a complex market. The program is tailored for operations involving logging (cutting and moving logs to a location for transport); log road construction (building roads for timber harvesting and management); chipping (debarking and converting feedstock to chips); and log hauling (using special trucks to unload and transport logs).

“I would consider us a one-stop shop for the industry. Some carriers only specialize in auto or inland marine, or a little bit of both. Very few have the ability and the opportunity to place the industry’s risks the way we do,” said Elmalis.

Rich experience in underwriting for this niche market also sets the Victor program apart. A world-class team of underwriters delivers competitive quotes for general liability, loggers broad form property damage, commercial auto, inland marine, and umbrella coverage.

Elmalis, despite more than two decades of experience in forest and logging, considers himself the “least tenured” on the team. “Everyone has a wealth of experience, with a minimum of five years dealing with forestry insurance. I think that’s a big differentiator for us: the management and expertise within a program that’s been in place for more than 35 years,” he said.

Apart from its specialized underwriting knowledge and strong carrier partner, the Victor Forest and Logging program is also helping the industry tackle one of its most pressing challenges: a shortage of log truck drivers.

“Many log truck drivers are starting to near the age of retirement, and it’s becoming ever more difficult to replace them in this industry that is very generational,” Elmalis explained.

Log truck drivers are an integral part of the industry, operating heavy trucks to transport logs and other wood products. According to Elmalis, several colleges in California and the southeast US have established programs where local insurance companies can sponsor students to complete their commercial driving license training.

“We’ve been able to start a positive dialogue with agents in our territories, which is one of the benefits of having a national program like ours,” he said. Log truck drivers require between one to three years of experience to be underwritten by some programs.

“We are working with our carrier and various training programs to put parameters around the required driving hours and safety measures for new drivers. Once they’ve completed their course, put enough hours behind the wheel, and been hired by our insureds, they can benefit from our program,” Elmalis explained.

“The new drivers may not have a year-plus of experience, but they will have the intense training specific to log truck driving, which will open some opportunities to bring younger drivers into the logging industry.”

Future opportunities

Looking ahead, Victor wants to help insureds adopt cutting-edge technology to reduce losses from log hauling and transport. “With the loss results in the industry, there’s a big push across all auto transportation to use dash cams and telematics,” Elmalis said. We continue to work on safety practices and controls with our insureds. We want to show them the benefits of these tools from a reduced claims standpoint.”

“Our program is focused on timber harvesting and the forestry sector, which covers exposures in the woods,” said Elmalis. “Our future vision aims to expand the program well beyond the woods and look at areas like wood products manufacturing, as well as the retail and distribution side of the business.

Learn more about the Victor Forest and Logging program here.