Event cancellation insurance: for when the show won’t go on
Lloyd’s of London wants its money back, and not just in nickles. It wants Nickelback to return $13 million from an event cancellation policy payout because, it claims, lead singer Chad Kroeger knew about his pre-existing throat condition that grounded 60 shows in the band’s 2015 No Fixed Address tour.
Most performances, however, will go off without a claimable hitch. And with musicians relying on performance revenue, sports teams reaching record numbers of fans and trade conferences attracting more attention, policies for such cancellation and non-appearances are shiny files in the adept broker’s portfolio.
Many policyholders look to insure their costs, rather than revenue, since it’s less expensive and it can be hard to prove future earnings. “With [shooting] commercials… they absolutely need to do what they have to do with good weather, good conditions, for the 10 hours they’ve booked all of this equipment for,” says Louis Gosselin, owner of wholesaler L.J. Gosselin & Associates in Toronto. “If something happens, all they’re concerned about is the cost of their equipment.”
But events more concerned with lower-than-expected ticket sales will opt to insure against revenue loss. A trade association’s annual convention, for example, will “be the occasion for them to make their annual budget for the year,” and if a rogue earthquake or epidemic cancels the entire event, the association will need to make up the budget somehow.
The standard Lloyd’s wording covers the net loss if an event is cancelled or postponed because of weather, travel delay, strikes or even national mourning. Companies can also buy several extensions, including coverage for the non-appearance of a necessary performer. For that, a doctor needs to sign off on that performer’s health 30 days beore the event. But to really understand the risk, brokers must research a performer’s appearance history.
After being approached by one performer, “I read the artist had come out a few years ago to say he had a medical issue,” says Judith Buckley, a risk solutions account executive at Aon in Toronto. And when she brought it up with the promoter, “he was shocked I was aware of it.”
Still, Buckley maintains non-appearance coverage is straightforward since the policy goes into effect a minimum of two weeks prior to the appearance. “It’s hard for things to come out of the woodwork unless there was something preexisting that we were unaware of.”
Reputation is crucial, but redemption is possible. For years, Rod Stewart’s illnesses made him uninsurable but his risk was re-evaluated after his health improved.
“I think it’s really important to understand the reasons for the cancellations,” says Judith Isherwood, head of special risks at Swiss Re in London. “Because sometimes you get artists who are really good and reliable in themselves, but shows can be cancelled for completely unrelated reasons.”
“No two events are exactly the same,” Isherwood says, which means selling even one-time, renewal-free policies to major events is a beast of its own. So event cancellation insurance requires specialist brokers as well as specialist insurers.
But most brokers, says Gosselin, “don’t know what the hell they’re talking about.”
Copyright © 2016 Transcontinental Media G.P. This article first appeared in the May 2016 edition of Canadian Insurance Top Broker magazine