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The financials of a pandemic: Brokers talk coronavirus

IQ talks to insurance experts to find out who is covered for coronavirus – and why many aren’t – and get some top tips on how to mitigate any damage done by the virus

By Anna Grace on 13 Mar 2020

The financials of a pandemic: Insurers talk coronavirus

The continuing spread of Covid-19, earlier this week declared a pandemic by the World Health Organisation, has caused the cancellation and postponement of major festivals and concerts, and the delay of on-sales for a number of tours.

Just yesterday (12 March), a coalition of concert giants consisting of Live Nation, AEG, CAA, UTA, WME and Paradigm, issued a statement recommending all concerts be called off for the rest of the month.

As restrictions imposed by national and regional governments around the world continue to affect the live music industry, IQ talks to Martin Goebbels from Miller Insurance and Steven Howell of Media Insurance Brokers to gauge the scale of the financial impact on festival and concert organisers, and share some top tips for limiting damage.

(Keep up-to-date on coronavirus-related restrictions in Europe’s biggest live music markets here.)


IQ: Coronavirus – are people covered?

Steven Howell: Event organisers can purchase insurance to cover their costs or revenue should their event get cancelled. In every policy there are exclusions – things like terrorism, communicable disease, war, civil commotion, lack of ticket sales, financial failure and national mourning.

Some of these things can be bought back as extensions. People that bought cover and included communicable disease before the end of January this year will have full cover if their event is cancelled for a reason directly or indirectly linked to coronavirus.

For policies purchase after that time there will be a specific exclusion for coronavirus and it is no longer possible to purchase the cover.

What would you say to those who claim it’s unfair that people can no longer get any cover for Covid-19?

Martin Goebbels: Typically, insurance does not cover cancellation due to a communicable disease like Covid-19, unless bought as an extension which has been extremely rare. This is due to the aggregate limit, or the total amount an insurer can pay out in a given year and on a single event or act.

With something like coronavirus, if insurers had given blanket cover, they would have no control over what their total losses could be, as it’s not limited by geographical region or anything else.

The virus also affects the same insurers for all events within the scope of entertainment including global sports events, exhibitions, conferences, theatre, film productions. It would have wiped out insurers if they had provided insurance across the board. That’s why its not included.

“Coronavirus would have wiped out insurers if they had provided insurance across the board”

If events are cancelled due to a government-mandated ban, that changes things, right?

MG: Wrong. A lot of people think that as long as they are covered for the government closing things down, then they are fine. However, it still doesn’t count as the insurance applies to the root cause of the problem if this is coronavirus then it doesn’t change anything and insurance would not apply.

Many promoters are now postponing concerts or festivals, rather than cancelling them. How does this changes things with respect to insurance?

MG: It all depends on whether they had insurance to cover coronavirus or not. For an insured risk, insurers would normally pay out for rescheduling costs, provided they are not greater than the cost of cancellation.

With the coronavirus situation people are looking where they stand financially at various stages. Sometimes, it is cheaper to cancel or reschedule a few days or weeks out than wait until the last moment and call it off, but every situation is different.

What advice do you have for event organisers at this difficult time?

SH: The best advice to anyone planning an event now that does not have the cover is to ensure all contracts include an agreement to reschedule if they are forced to close. In this case, if they cannot agree on a new date, then all deposits are returned.

This way, the financial impact on all parties will be minimalised as much as possible.

“The best advice is to ensure all contracts include an agreement to reschedule if they are forced to close”

MG: My advice is always to get insurance in as early as possible, and the situation with coronavirus highlights this. It is debatable whether it would have made a difference in many cases as history confirms only a tiny fraction of clients would have bought the cover in the last 15 years.

People need to remember to leave room in the budgeting for insurance. Too often, it is not considered until it’s too late.

Is cancellation insurance still useful in wake of the coronavirus outbreak?

MG: Show cancellations have been happening for years and years, and for an infinite number of reasons. It’s a blinkered attitude to say cancellation insurance is useless just because coronavirus is not covered.

What this has highlighted is that people should read their policies and take the time to understand it – like any contract they are boring but you’re paying good money for it, so you need to understand how it works for you.

“My main concern is for the independent event organisers and the freelancers – it is frustrating we do not have any insurance solutions to help protect them”

How are these cancellations expected to affect the industry?

SH: If events are forced to close then it will not be good news for anyone in the live music industry.

However, if the spread mirrors that in China, it will be for a very short period of time and affect a very small proportion of the country. All the event organisers I have spoken with are being pragmatic and bullish about this and we all expect to get back to business as usual soon.

My main concern is for the independent event organisers and the freelancers who depend on them for the livelihood and it is very frustrating that we do not have any insurance solutions to help protect them.

Will we see changes to insurance policies going forward, to protect more organisers from a similar situation occurring again?

MG: This will certainly open up the conversation around cover for communicable disease. I expect everyone will ask insurers for communicable disease cover next summer, and then after a year or two their appetite to pay the extra premium will probably go away again. The same thing happened with the Sars outbreak in the early 2000s, and terrorism cover after 9/11 until the Bataclan tragedy.

I also expect insurers will tighten up the extension. This has highlighted that viruses like this can become worldwide within weeks, whereas it’s been more of a regionalised issue before.


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