Premiums Go Sky High on $105-Million Deal

It is a broker’s nightmare, insuring a contract like the one Kevin Brown signed with the Dodgers, who must pay him a guaranteed $105 million over seven years.

“He’s 34 years old, right?” said Mark Mitchell, an Atlanta broker who deals with several major league teams. “The chances of Kevin Brown going seven years without a claim . . . you’re talking about massive risk.”

But it is also a broker’s dream, because all that risk translates into sky-high premiums.

The Dodgers, who have insured 75% of Brown’s contract, declined to say how much they will spend in premiums for this season. Sources put the figure between $1 million and $3 million.

That’s in addition to the $15 million they will pay Brown to pitch.

“Still, it makes sense for them to get insurance for those big-ticket contracts,” said Marc Idleson, a Stoneham, Mass., underwriter.

According to several industry experts, a club that signs a player to a $105-million deal should insure itself for about $70 million the first season. If the player suffers a career-ending injury right away, the team can file a claim and recoup millions more in tax write-offs.

The premium for such a policy would run high because insurers get nervous when they have to cover any single player for more than $50 million.

Costs drop each succeeding year. After paying the player his $15-million salary the first season, the team would owe him $90 million over the rest of the contract and would buy $60 million worth of insurance for the second season.

Over seven seasons, the team has insured itself for almost $300 million in risk. That means millions of dollars in premiums. It’s a gamble only some insurers are willing to take. And a cost of business that irks some owners.

“Nobody wants to pay the premiums,” Mitchell said. “They just want to collect their claim checks.”