All write now? Insuring events in the age of Covid

This summer’s events and festivals may have been largely wiped out due to the ongoing pandemic, but live event organisers are determined to return to some kind of normality.

With large-scale event bans due to lift before the winter, the live music industry is daring to plan for the future – but at what cost?

Organisers are still reeling from the economic impact of this year’s cancellations, and few are willing or able to risk shows without cancellation insurance in place for Covid-19. Even with government go-ahead for venues to reopen, without insurance, the industry is at a standstill.

So what might live event insurance look like over the next 12 months? Insurers from two of the biggest global markets, the UK and the US, tell IQ why a government-backed insurance fund is needed (but problematic), what’s causing many underwriters to quit offering cancellation insurance, and how policies may change in the months ahead.

When it comes to insurance for future live music events, there’s only one question on the industry’s lips: When will insurers provide cancellation cover that includes Covid-19?

The answer is, according to brokers in the UK and the US, not any time soon – if at all.

The problem, as Steven Howell from Media Insurance Brokers (MIB) in the UK explains, is that it’s impossible for underwriters to put a price on Covid-19 cover while we’re still in the midst of the pandemic.

“It’s a bit like asking us to insure your house while your house is still on fire; it’s too late. You can only assess what the damage is and what repairs are needed once the fire is out. And once that happens, underwriters can assess the likelihood of that house burning down again and work out what premiums to charge you to cover it,” he says.

“Asking an underwriter to take a view on the likelihood of whether the government will impose a local lockdown, forcing the cancellation of an event, is impossible because no one knows. No one is in control of the infection rate and no one is in control of the government.” 

“You can only assess what the damage is and what repairs are needed once the fire is out”

However, it’s the authorities that the industry is turning to for support. When the UK government announced its £500 million scheme to kickstart film and television productions struggling to secure insurance for Covid-related costs, there was a question of whether the live music industry might receive the same.

The programme will support productions if future losses are incurred due to Covid and fill the gap left by the lack of available insurance and cover coronavirus-related disruptions, such as delays in filming caused by unwell staff.

A proposal is currently being worked on by entertainment and sports broker Tysers in partnership with the UK’s various industry associations, though no details have yet been released. One of the difficulties, as Martin Goebbels from Miller Insurance points out, is that live music events present an entirely different set of variables from that of TV and film productions.

“Productions are behind closed doors, in more contained environments, and generally can be far more easily controlled and contained. The problem for live music events is the audience and everything that comes with that, such as public transport and having large crowds in any restricted area, whether it be the actual venue or extra numbers arriving in a town,” he says.

So far, only one arena in the UK has risked staging events with the possibility that the government could enforce a local lockdown at any time, forcing the organisers to cancel.

Howell at MIB insured the UK’s only major summer concert series of 2020 at the country’s first socially distanced arena, Newcastle’s Virgin Money Unity Arena.

“Insurers might need to be prepared to cover certain losses not contemplated as part of coverage offered today”

While MIB couldn’t provide cancellation cover which includes a Covid-19 extension, it could provide public liability cover, in case anyone gets ill or contracts the virus at the event and tries to sue the event organiser.

“In order to ensure there was no exclusion for coronavirus added to the public liability policy we needed to review the organisers risk assessments and Covid-19 protocols to make sure they are adhering to latest advice and minimising risk of catching or spreading the disease,” says Howell. 

The organisers have said that they were keeping “one eye on government legislation,” hoping there wouldn’t be any major changes or a local lockdown that would put the series into jeopardy. 

So what are the possible solutions that would give event organisers the confidence to start planning for next year and committing costs?

One suggestion from Howell is to increase the tax on insurance premiums, in line with VAT, and reserve the excess for cancellation cover.

“Most people are used to paying 20% VAT. On insurance, you pay 12% so even if you increase it to 15 and siphoned off that 3%, it would create a pot of money through insurance that is available to bail out in case of cancellation.

“It’s similar to what the US did after 9/11 when they increased premiums and siphoned off a small percentage in case your business or event gets affected by terrorism,” says Howell. 

“Once live events do come back, there will be an adjustment period for those who wish to put on the shows and those who wish to insure them”

Carol Thornhill from Epic Brokers in the US also cited the terrorism pot as a possible solution, but says in the current political climate she doesn’t necessarily see it happening.

“We do have some clients that are actually working in venues with proper social distancing protocols, in the hopes that the state stays open.

“A lot of states like Florida and Tennessee are a little bit more relaxed than others and so they’re really not shutting down promoters and events much at this point,” she says.

Any changes to insurance policy in the US is much further down the line, as underwriters have to go through a state filing process, which Tim Thornhill of UK-based Tysers says is more of a lengthy procedure.

Scott Carroll from Take1 Insurance in the US says he imagines adjustments to the Covid-related insurance cover would take into account factors such as the venue’s protocols for sanitisation; food service; public toilets; adherence to Centers for Disease Control guidelines; and duty of care.

“The insurers might need to be prepared to cover certain losses not contemplated as part of coverage offered today. Once live events do come back, there will be an adjustment period for those who wish to put on the shows and those who wish to insure them,” he says.

Another change coming in both the UK and the US is an increase in premiums. In the UK, that increase is down to lack of capacity in the insurance market and a higher demand, according to Howell.

“Travel insurance is likely to increase as well, which may have a small effect on future tour budgets”

“Lots of underwriters we used have quit,” says Howell. “They’ve said, ‘we’ve lost so much money in this first wave of cancellations that we’re not going to write contingency or cancellation for the foreseeable future,’ and closed their books.” 

This means that the remaining underwriters will be looking to claw back some premium by charging higher rates.

Tysers has been more fortunate with business during Covid-19 and was able to pay out on cover in many instances, says Thornhill.

“In relation to non-appearance policies, our wording, drafted in the time of [predecessor companies] Robertson Taylor and later Integro allowed most of our clients the opportunity to successfully lodge claims,” he explains.

“It was significantly different to the standard Lloyd’s wording used by others, as our communicable disease [CD] exclusion was limited to a number of named diseases. Covid-19 was not one of those and consequently we were able to confirm fairly quickly that coverage operated as opposed to the blanket CD exclusion offered elsewhere.”

Goebbels points out that Covid’s effect on the insurance industry will have other knock-on effects in other ways too.

“Travel insurance is likely to increase as well, due to massive losses in recent months, but at present we do not know by how much, as touring is not happening,” he says. “That may have a small effect on future tour budgets, but it is too early to say.” 

With insurance a key consideration for festival season 2021, the topic will be discussed in more depth at next week’s Interactive Festival Forum, with Thornhill and Howell among the experts speaking as part of the Insurance & Covid-19 workshop.

Register for iFF 2021 here.

This article forms part of IQ’s Covid-19 resource centre – a knowledge hub of essential guidance and updating resources for uncertain times.

Get more stories like this in your inbox by signing up for IQ Index, IQ’s free email digest of essential live music industry news.

The financials of a pandemic: Brokers 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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