Fear of poor weather conditions and infectious diseases have pushed demand for outdoor event abandonment cover to new heights. But is there enough capacity to meet requirements and increased risk? Jane Bernstein finds out
Organisers of outdoor events have every reason to be nervous. Adverse weather conditions and the threat of infectious diseases, such as foot and mouth, seem to have conspired against the smooth-running of special occasions in recent years. This nervousness is being reflected in changing buying patterns as far as insurance cover is concerned, with an increasing number of organisers looking to cancellation and abandonment cover for the first time. So are they managing to find the right cover at the right price and is there enough capacity in the market to meet both rising demand and increased risk?
Anecdotal evidence certainly suggests demand is on the rise for cancellation and abandonment cover, with insurers reporting significant increases in enquiries, particularly following the disastrously wet summer of 2007. Chris Rackliffe, contingency underwriter for Beazley, comments: "Last year was quite an exceptional year as far as the weather was concerned. A number of high-profile events were cancelled and that's certainly led people to enquire about the cover."
But industry experts also emphasise the unpredictable nature of British weather is nothing new. Elizabeth Seeger, contingency underwriter at Hiscox, points in particular to the storms of 1987 that weather forecasters famously failed to predict. While Brian Kirsch, managing director of Event Assured, asserts: "There seems to be a presumption that we're currently having worse weather than we've ever had - but bad weather is not unusual."
But Ms Seeger adds that, over the last two summers, it has not simply been a case of a rainy month here and there but rather three or four consecutive wet ones. "This has built up resulting in waterlogged ground and bad conditions. Consequently, even if there is no bad weather on the day of your event, the ground can be so bad you can't hold it."
Despite unfavourable weather being common in the UK, it remains true that a particularly bad summer, accompanied by news coverage on rain and cancelled events, will invariably convert into tangible sales increases for brokers and insurers. John Silcock, managing director of Robertson Taylor Insurance Brokers, part of the Oxygen group, reports that following last year's dreadful summer, his firm has seen a 50% increase in purchases of cancellation cover for 2008.
The CLA Game Fair is a case in point (see box, below). Well-established as this annual event is, last year it was forced to cancel for the first time in its 50-year history. This prompted its organisers to take out insurance against disruption for 2008 - including adverse weather conditions and infectious diseases - the first time it had done so.
The question is whether newcomers to cancellation insurance find the cost of cover affordable or whether it has escalated as a result of any perceived or actual increased risk? The response from insurers is that rates remain stable and there have been no notable restrictions on terms. Many also point to decreasing rates in line with market conditions.
Jon Wilkinson, chief operating officer at Worldwide Special Risks, emphasises: "Our adverse weather terms have remained steady over recent years with rates even falling for some types of events following a general market trend." Mr Silcock agrees: "The apparent increase in the volatility of weather has not caused rates to increase; it's still a competitive market."
An increased demand for cover should also help sweeten the pill for insurers suffering losses. As Lucy Scurlock-Jones, managing director of Event Insurance Services, observes: "If there is an upturn in business specifically for this type of cover then surely it should bring rates down?"
Equally, insurers and brokers are keen to clarify that while this remains a niche sector, there is no lack of appetite to underwrite cancellation and abandonment cover nor a shortage of capacity in the market. Mr Silcock comments: "The contingency market is quite substantial and we have not seen any reluctance from insurers to underwrite cancellation insurance for outdoor events."
Mr Kirsch states the market is only tested when it comes to particularly large events - such as the Olympics - in which case it tends to be a question of global placement. He adds: "I don't believe customers have difficulty in finding the right cover as long as they go to specialists who understand the risks."
It was, in fact, Event Assured that successfully put together cover for first-time buyer the CLA Game Fair. At the time it was reported that, despite a whole-market competitive tender, Event Assured was the only player able to cover the entire revenue for all the events required (Postonline, 19 February 2008).
According to Mr Kirsch, it was not a question of difficulties in finding cover, but rather that the challenges lay in establishing the right package for the complex event. CLA Game Fair director David Hough agrees: "There were insurers in the marketplace but negotiating the right cover for us took time. The CLA Game Fair is an exceptionally large event. It is also unique in that it's the only big show that moves around the country; it's held in a different place each year."
The consensus is that this remains a niche market due to the level of experience and specific expertise required to underwrite it effectively. The ability to take on a diverse set of risks is also widely considered to be a prerequisite for success. As Ms Seeger observes: "You do need to get a wide spread of risks and a broad number of events; if you are just looking at the adverse weather peril, you are basically gambling on UK weather."
Last minute booking
While premiums reportedly remain stable, costs can rise sharply if cover is bought at the last minute. Mr Rackliffe claims the practice of enquiring about cover too late remains a significant issue needing to be addressed - and organisers who do leave their insurance until the 11th hour are vulnerable to prohibitive costs and restricted terms. Ms Seeger explains: "The general rule of thumb is that within 14 days of an event, it can be harder to buy cover."
Perhaps unsurprisingly, smaller events are more likely to leave arrangements until the last minute. "The larger events are often more sophisticated when it comes to insurance buying and would know that by buying cover a year in advance, they can obtain fuller cover than at the last minute," continues Ms Seeger. But Mr Wilkinson says there is still a need to raise awareness among event organisers: "A bout of bad weather will often kick-start last minute enquiries from organisers who did not see adverse weather as a peril until it was too late. Educating organisers to the added benefits of buying early is the real key and losses are our shop window for this."
While much attention has been devoted to bad weather over the past 12 months, Mr Hough emphasises that the threat of infectious diseases remains significant - and was a vital factor in arranging cover for the CLA Game Fair this year. "Over the years the show has been built and constructed alongside some pretty awful weather, but our team is used to this and we've generally been able to overcome difficult conditions," he explains. "The one year it did get very close to being cancelled though was 2001, due to foot and mouth."
Show must go on
The Surrey County Agricultural Society reports a similar experience for its own annual event. Chief executive officer Sonia Ashworth asserts: "We try not to cancel. Our livestock and other animal classes can continue despite the weather and the exhibitors involved are used to UK conditions." However, she admits the 2001 foot and mouth outbreak did force the Surrey County show to cancel.
Despite the recent surge in enquiries for cancellation cover, sustained increases in demand are unlikely for various reasons. Events organisers failing to prioritise insurance is a notable issue, particularly among smaller events that do not take place annually. Again, Mr Wilkinson emphasises education is vital. "Creating an understanding of what the client is getting for their money is key. Many do not understand the full benefits of the protection they are buying or, more importantly, are choosing not to buy."
Ms Scurlock-Jones says it is a question of organisers fully indemnifying themselves for all aspects of cover. She adds that liability cover goes without question, but even this is often left until the last minute. According to Peter Forshaw, partner and head of leisure at law firm Weightmans, there is no prescriptive legislation governing the holding of outdoor events, although the Health and Safety Executive does provide useful guidance in publication HSG 195, which is currently being updated.
Raising awareness about cover is also important for specific types of circumstances. Mr Kirsch says one of the major questions that organisers of charitable events tend to ask is whether they can insure the profit they expect to make. He explains the answer depends on the event: "It's relatively straightforward to insure pre-booked income, such as advance ticket sales or sponsorship. What is more difficult to insure is speculative profit. For example, if there is an auction or a raffle, it is impossible to predict how much money you will make."
Mr Wilkinson adds: "Advance income, for example ticket sales, can be dealt with in the same way as for a concert or exhibition. If charities can substantiate the revenue that they would expect to make during a fund-raising event it is possible to protect in addition to their costs. It's harder to substantiate income from raffles or auctions on the night but previous experience does make this possible."
Charities are, however, arguably more aware than others of the insurance on offer. Ecclesiastical spokesman Chris Pitt explains: "Generally speaking, the charity sector is becoming more and more professional in the way it operates. The bigger charities in particular are increasingly investing large sums of money in organised events to raised large amounts of much-needed funds. They are very aware of the pressure on those events to deliver and the impact if they fail; they are also aware of the value of insurance and the need for it. And because of the scale of what they are undertaking, these organisers can justify spending money on that insurance as well."
Continued adverse weather seems certain to result in increased demand for specific event protection across the board but this insurance sector must continue to step up its efforts in terms of raising awareness. As Ms Seeger points out: "People have very short-term memories when it comes to spending money on something."
While event organisers will be hoping for the long-term weather forecast to improve, the challenge for insurers is to maintain interest in cancellation cover even when the sun shines.
After being forced to cancel its annual event for the first time in 2007, the CLA Game Fair, which claims to be the world's largest countryside event, has now taken out insurance against disruption. This includes adverse weather conditions and infectious diseases; cover was arranged with Event Assured through broker RK Harrison. CLA Game Fair director David Hough provides some insight into the process:
How difficult was it to find the right cover?
"It took a lot of work; via our brokers, we spoke to various insurance companies. As much as anything, it was negotiating the right type of cover for us that took the time. We needed to make sure it wasn't just bad weather; we were very close to disaster in 2001 because of foot and mouth and we wanted cover for that and other potential infectious diseases."
How significant are the costs of cancellation cover?
"The CLA Game Fair, being very big, is also very expensive to put on. It would be much cheaper if we held it in the same place every year but we don't think that is right for the event. So it does cost a lot and consequently adding to the insurance costs was a big consideration."
Having had to cancel the event in 2007, how did it go this year?
"The event this year was a great success. The sun shone throughout and we had a record crowd - our previous record was 138,000 and we shot up to 151,000 this year."
The Royal Bank of Scotland Caledonian Challenge is a 54-mile walk along the West Highland Way which participants aim to complete in 24 hours. Its organiser, SCF Events, takes out public liability insurance and is now keen to take out abandonment cover too. John Mercer, events director of the RBS Caledonian Challenge, answers some key questions:
How easy or difficult is it to find cancellation and/or abandonment cover for this event?
"It's very difficult to find the right provider: the policies I have seen provide cover for actual expenditure rather than lost income."
Does the inclusion of cancellation/abandonment cover add significantly to the costs of insuring the event?
"No - less than 1% total costs."
What kind of conditions could cause the event to be cancelled?
"The RBS Caledonian Challenge typically involves 1500 people challenging themselves to complete 54 miles in 24 hours. People of all shapes and sizes, from all walks of life, take part and stretch themselves by undertaking strenuous physical effort for a sustained period over remote and rugged terrain.
"High wind is probably the biggest cause for concern as the path does pass through several forests. Cold and wet weather is also a concern; heavy rain is miserable but survivable so long as it does not trigger flooding. One particular problem is support vehicles becoming bogged down in fields. Very hot and sunny weather will also cause us problems."
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