The rain attraction

After two very wet summers, Leigh Jackson ponders whether the cancellation of a number of high-profile events will lead to an increase in the take up of events insurance

Bristol's Ashton Court Festival, the Royal International Air Tattoo at RAF Fairford and York Ebor Racing Festival - just three of thousands of events that were ruined by adverse weather in 2007 and 2008. The cancellation of so many high-profile events has brought increased focus on the risks of cancellation and abandonment. The question is, will this heightened awareness translate into increased sales of events insurance?

Statistics from the Met Office show that summer 2007 was the wettest in the UK since precipitation records began in 1766, with the Midlands and the North-east drenched by twice the regional average. In addition, research conducted by Hiscox revealed that almost two-thirds of event organisers do not buy cancellation insurance, despite the fact 90% view risk management as important.

This, combined with the prospect of more wet weather this summer, could bring a raft of new clients under the event cover umbrella. However, insurers still face an uphill struggle to maximise the potential for increased demand.

Weather is not the only challenge for events organisers and, in the current economic climate, the costs associated with events are all-important. There will inevitably be questions over whether an event can be staged at all and the costs of the insurance itself can also prove prohibitive.

In September 2007, the Weymouth Carnival was cancelled partly due to the rising cost of event insurance, while last August's Veterans Weekend in Hull was only saved from financial ruin - citing the increase in its insurance premium - when the City Council stepped in to save it.

Insurers are divided over whether the cost of events cover is indeed spiralling. Jardine Lloyd Thompson sports partner Duncan Fraser says that the gloomy weather has caused the price of cover for outdoor events to increase. "Specific events have seen the majority of the rises, especially the outdoor events," he says. "They are very reliant on weather."

Meanwhile, Chris Rackliffe, contingency underwriter at Beazley, argues that, following the terrorist attacks of 2001, pricing in the insurance market was too high but has gradually been corrected. "After 11 September 2001 rates rose quickly and have been coming down since," he says.

Unpredictable conditions

Insurers do agree on one thing, the need to evaluate event risk carefully in the face of unpredictable conditions.

Mr Rackliffe adds: "There is no doubt that over the past two years outdoor events have suffered a flow of losses. Certain areas have been adjusted to reflect that. We have had two wet summers leading to high-profile losses and that could have some effect on prices."

Due to the increased risk, insurers are working with organisers to try and reduce the chances of an event being cancelled.

Ecclesiastical spokesman Chris Pitt says that communication between the two groups is crucial: "The best thing for organisers is to be open and honest with insurers and then we can deal with the issue in a balanced way," he says. "Organisers need to be confident and share information in an open and honest way. Regular dialogue is very important."

In addition to frank discussions, organisers are encouraged to put practical measures in place to prevent cancellation. Mr Fraser argues that clients should explore any measure that could prevent an event being cancelled.

"There are also various procedures that can be undertaken on the ground when organising the event - for example, a cause for cancellation could be a waterlogged car park. Putting in proper drainage, metal grids on roads and having vehicles on standby to help move stuck cars could all help the event take place."

The timing of requests for cover is also hugely significant. While well-established events purchase cover as early as possible, some organisers of smaller ones only look to buy insurance at the last minute, which could lead to an increase in cost as well as the imposition of exclusions.

Hiscox events insurance underwriting manager Martin Linfield says that delaying the purchase of cover could, in more extreme circumstances, leave an organiser with no insurance at all.

He observes: "If you do leave it to the last minute, and the unforeseen occurs, such as an outbreak of foot and mouth, cover may not be available at all."

However, a late request for cover does not necessarily mean organisers are unaware of the issues - and some may delay purchase due to financial constraint.

QBE head of business for accident and health, film and contingency Mike Bridgeman says that some events are left in a difficult position, with the need for cover increasing and budgets decreasing.

"At the moment, with all the financial pressures companies are under, it is more important to properly protect events, as there is less of a margin available to withstand loss. However, some events are struggling and insurance may be seen as expendable."

This dilemma is echoed by HCC managing director David Evans, who emphasises that organisers should not take a short-term approach when deciding whether to purchase cover.

He adds: "Due to the economic environment organisers are falling into two schools of thought. The first is that we cannot afford to lose an event, so we must buy insurance. The second is that the budget is tight, so we cannot afford to buy cover.

Substantial losses

"It's a tough call. Companies need to look to the long-term. Can they afford to lose events and lose money? In some cases the losses can be substantial."

With the memories of previous summers casting a shadow over the prospects of fair weather in 2009, event insurance is looking every bit a necessity. So, will penetration increase beyond the 38% touted by Hiscox?

Events Insurance MD Lucy Scurlock-Jones, says that enquiries for cover are on the increase. "We have seen more interest in cover; more organisers are beginning to take it more seriously," she says. "Potential losses mean cover is more closely considered. We have to keep our fingers crossed, we are in the middle of the crunch and it would be nice to get a greater number of events going ahead to cause an upturn in the market."

Chubb entertainment underwriting specialist Alan Norris agrees. "There has been a continuing upswing in enquiries over the past two years for event cover, with some of those coming from organisers who have never brought it before," he says.

Inevitably, two of the wettest summers on record have helped to highlight the inherent risks to events and the need for effective cover but insurers should perhaps still expect a trickle rather than a flood of new customers. As Mr Norris concludes: "Every enquiry does not result in a purchase, especially with outdoor events when there is a budget in play. But there has definitely been an increase in awareness."

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