Analysis: Covid-19 event cancellations

Cancelled events

Following the Covid-19 outbreak live events across the world had to be postponed or cancelled due to fears for public health and safety. Multibillion-dollar losses as a result of coronavirus has put the contingency market under the spotlight, while insurers and brokers for the sport and entertainment industries have had to adapt in the current climate

On 11 March the World Health Organisation declared Covid-19 as a pandemic, which for the first time in years led to the cancellation of major public events such as Glastonbury music festival and tennis tournament Wimbledon.

While a number of major sporting and entertainment events do not have pandemic cover in place as business interruption policies usually pay out only if there is physical damage to an organisation’s assets or operations, it was widely reported in the media that Wimbledon’s BI policy had a pandemic inclusion meaning it is set to receive a payout of more than $100m.

Edel Ryan, head of strategic business development at Marsh, says: “Cancellation contingency insurance is used very widely by the sports entertainment and media clients. It’s designed to protect the value of a project from unforeseen events resulting in additional cost to the budget either from rescheduling or from cancellation. The event cancellation world has been rocked by Covid-19 and its never in its history had this volume and value of losses and it is unlikely to ever again.”

While event cancellation policies are tailored to the specific event being held, in the current climate these policies are only valid for businesses that had bought communicable disease cover prior to the pandemic happening, according to Matt Helm, contingency practice leader at CFC Underwriting.

Helm told Post: “Even if you had communicable disease coverage it would most likely exclude Covid-19. If you had bought that for an event it would depend if it was more economical for it to be cancelled or postponed to a later date and then the policy would pick up the cost of that postponement.”

Policy wording and contracts

Ryan says: “The exclusions [in a policy] define what’s not covered. The force majeure typically in a contract is between two parties where both parties are protected from breach of contract in the event they are unable to deliver services for something beyond their control, so Covid-19 would be an example. But in a policy wording the cover around Covid-19 is more likely to be found under a communicable disease extension or within the exclusion of a communicable disease.

“Cancellation policies differ from one risk to the next. You’ll have a standard type cover. Often that standard type of cover is bespoke to the nature of the clients and the projects. So communicable disease is typically found as an exclusion in policies.”

“[If we look at] contingency insurance for live events and major acts – the insured person will be the act unless the venue is closed by order of the government or public local authority because this disease has manifested itself at that venue or unless the event is closed by order of government because of a ban of public meetings and gatherings. 

“No two policies are the same – so there will be policies that have that kind of cover but they will have a further exclusion that excludes pandemics. So once a pandemic has been announced the exclusion then would apply but not every policy has pandemic exclusion.”

These cancellations and postponements have also negatively impacted promotional partners, licensees and business involved in merchandising who face severe losses as there is less demand for merchandise that were produced for these events. They are now faced with the decision as to what to do with merchandise inventories.

Jade Giltrap, media team leader at CFC Underwriting, says: “Prior to Covid-19 we had a product focused on the licensing industry. The events and sports entertainment side – we focused on that as we are already seeing a massive number of enquiries in that space and we isolated those contracts because a lot of the time it is difficult to write contracts for a sporting team and authorise a contract for a venue and it’s much easier to focus in on the contract itself.

“With Covid-19 that side of things have quietened down as the events are not taking place but actually there’s quite a lot of litigation going on in terms of things like different sporting associations that may have sponsored somebody or been sponsored by somebody and then were forced to fall under these terms; so there is a lot of loss of revenue around that.”

Assessing the risks

According to Bilal Mirza, member of the Forum of Insurance Lawyer’s sports sector focus team and consultant at DAC Beachcroft, most pre Covid-19 pandemic insurance policies provided for wide-ranging cover for individuals playing sport and sports liability risks. He highlights the risks for golfers buying policies now as an area of concern.

Mirza told Post: “There are two risk groups here: non-golfers taking up golf so that they can participate and play a sport; existing golfers now returning to the sport with lapsed insurance and who have not renewed either because they have chosen not to and/or they cannot or because the cover available does not provide adequate cover or unaffordable cover.

“The risk of having no insurance is the same for both – usual risks for golf include hitting someone with a golf ball from a wayward drive or being hit by a golf ball, clubs being damaged or stolen to even causing an accident and damage while using a golf buggy.

“Most household insurance policies will not cover these events and will leave the individual personally exposed and liable.

“In addition with travel restrictions being lifted within Europe, any trip abroad to play golf with no specific golf insurance policy will leave the individual potentially exposed to potentially significant damages and costs which could run into thousands of pounds. Again some travel insurance policies may exclude cover for golf equipment and playing golf.  

“Those new to the sports may not perceive golf as a risk sports and one which requires insurance so potentially more likely to take risks and leaving themselves exposed to a higher chance of liability.”

Mark Dearden, is sports development manager at Extra Cover Insurance, part of Marshall Wooldridge and specialises in offering bespoke insurance to cricket clubs, and he argues cricket has been the sport hardest hit by the pandemic. “Cricket has suffered more than most as we were in the middle of preparing for the new season and weren’t able to start.”

“That left clubs with a financial hole to fill, set costs such as insurance, affiliation fees, rent and rates with no income.

“Our staff reacted quickly to discuss the clubs’ real needs during the lockdown. Although the majority of the property and liability risk remained in place, discussions were had around covers that could be deleted with a view to being re-instated once our national summer sport was able to commence.

“Following the resumption of cricket, the majority of clubs have opened up but there will be a number whose doors will never re-open.”

He adds: “Clients seek reassurance as to what is and what is not covered. During lockdown our sports division has received and made in excess of 2,500 phone calls and answered hundreds upon hundreds of emails. We have never been busier.”

A hardening market

Some of the bigger insurers that cover the events market have sustained large losses. Matt Helm, contingency practice leader at CFC Underwriting, says: “We’re starting to see some shifts to recovery now but for two to three months there was very little business for brokers to broke so that would have probably been the biggest impact on them. 

“The market is definitely hardening and rates are changing but there is no business to insure  – the market hasn’t really arrived at a landing on what that looks like. Brokers are probably getting different rates from different insurers because nobody is throwing enough business for those rates to settle.

“It’s going to take some time for the market to recover and start looking forward again. A lot of the significant players especially in those large events where there are insurers that insured Wimbledon, the Olympics, the Derby are more publicised losses. Until they’ve recovered from those positions I can’t really see communicable disease is going to be offered on any scale in the near future.”

Virtual events

As major events have been cancelled, postponed or moved online, insurers are now offering cover for virtual events, for example for when a transmission failure disrupts or cancels a virtual event.

Beazley’s virtual events transmission policy supports organisers that rely on technology platforms providing transmission or broadcast to their audiences. If an event is cancelled due to transmission failure, the policy covers first-party losses including organisational costs, expenses, or gross revenue from advertising and ticket sales.

Mark Symons, contingency underwriter at Beazley, says: “For a long time, many events, from business conferences through to music festivals, have had an online element, which has been covered by endorsement to an event insurance policy. However, as a result of the coronavirus we are seeing far more events either being reorganised or created from scratch for purely virtual audiences.

“Even with lockdown easing, we expect this to continue both in business and leisure as people continue to avoid unnecessary crowds. These events are completely reliant on the technology working and a failure can be financially crippling, which means having robust insurance in place is a must.”

Ryan argues with more virtual events now taking place there is an increased awareness around cyber. “Insurers are having to be clear on whether the cyber is covered or not. Previously it was something silent across many policies, you now have to be very clear about offering the cover for that and that’s becoming an increased topic of conversation. With virtual there is always a risk around transmission and that is prevalent with technology.”

She adds: “All parties involved  – the brokers, the market, the client are all actively looking to find ways to manage the risk going forward. I have no doubt we will come to a solution because we are still in such a sensitive unknown area around Covid-19 we have perhaps time – time will be a big factor in what the market can and are able to do.”

Giltrap adds: “While the physical events can’t go ahead the virtual events are certainly going ahead. Different cover would be required focusing a bit more around the capability of the technology, while the world is in lockdown. While physical events are not going on the same brokers might need to find insurance solutions for clients that want to monetise their brand virtually.”

Future cover

As coronavirus still remains a threat, insurers are not offering BI cover with a pandemic inclusion. Ben Carey-Evans, insurance analyst at Global Data, argues: “Major events and sporting tournaments are set to face considerable risk over the next year as insurers back away from offering BI after Wimbledon’s huge payout. Wimbledon was clearly better prepared than most other events, having had BI insurance with a pandemic clause in place for 25 years.”

He adds: “Wimbledon not being able to get the same level of protection exposes it to a great deal of risk next year, as Covid-19 could still prevent large gatherings in the long-term while a vaccine is found and distributed. That an event as high-profile as Wimbledon can’t renew its policy suggests it is unlikely that any major event in the UK will be able to have pandemic cover for BI in the immediate future, and going ahead with events before a vaccine is rolled out is extremely risky.”

Ryan says: “At the moment the market is still exposed and experiencing losses. The position as it stands  – cover for Covid-19 is not available. There are a few insurers that are looking at providing very small limits for a very short period and no later than October. So there are a couple of insurers that are doing small limits because they believe the timing now is an opportunity to be able to offer the cover and take the risk but for a very short period and we won’t know until we’re further into Covid-19 or further out of lockdown how the market will react. That position may change at a later date. But not until we have a clearer view of the risk.”

Markel has stopped underwriting personal accident or contingency insurance and has confirmed it will focus solely on the entertainment book of business. James Hastings, managing director of wholesale at Markel International, says: “The performance, market dynamics and sector outlook for PACE have been part of a strategic review and with the addition of the impact of Covid-19, sadly we found that neither PA nor contingency were viable beyond this point.”

Helm explains nobody really foresaw a global closedown people thought it was possible but would be more localised. He says: “The worldwide shutdown is what has caused the biggest shock to the market. In the meantime businesses will have to run that risk.” 

“There have been some discussions about a Covid Re similar to Flood Re and that might have ability to cover those kinds of risks but that’s a long way down the line.” 

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