Events - Adding value in a troubled market

On 19 March, the Society of Motor Manufacturers and Traders announced that it has cancelled the 2010 British International Motor Show, Britain's largest consumer exhibition. SMMT chief executive Paul Everitt blamed the uncertainty surrounding the economy for deterring manufacturers from committing to large-scale international events.

While event organisers expect revenues for summer 2009 to be down, several shows are being cancelled for next year. Brian Weetman, managing director at Heatland Event Insurance, notes: "In 2010, one or two large household name events may disappear completely."

The recession is not just affecting the events insurance market as a result of a reduction in their numbers. Ian Gosden, managing director at Higos, believes that cover is also harder to secure: "Most scheme insurers, especially those that do not hold a large book of business with a broker, will no longer issue policy documentation or confirm cover until payment and a proposal form is received before inception. Whereas bespoke markets have been tightening the wordings of their terms, increasing excesses or placing additional conditions on events that seem to have a larger exposure - or even declining to quote on a risk altogether - this has meant that events that may have had to fit on a scheme previously are now having to be quoted on a bespoke basis."

Silver lining

However, Duncan Fraser, practice leader at Jardine Lloyd Thompson's sport division, believes that the recession can offer opportunities for brokers because those events that are still going ahead are more likely to seek out insurance cover. He comments: "The economic crisis is resulting in more event organisers investigating the purchase of insurance. The financial consequences of an event being cancelled can be crippling and, rather than taking the risk on themselves, organisers are coming to the insurance market for protection."

Brokers should also be aware of increased competition from affinity players. John Lewis' Greenbee is offering pre-packaged event cover at its checkouts, while other offerings include bridal dress shops and invitation printers for wedding insurance.

However, Jon Wilkinson, chief operating officer at WorldWide Special Risks, believes that affinities do not pose a threat to specialist events brokers: "Packaged products from affinities provide limited cover. We had an enquiry for a 92nd birthday party that was excluded under an affinity scheme. There can be a place for packaged cover where customers have simple needs but they do not include the advice element that brokers give."

Wilkinson continues: "Event insurance is a niche, innovative market. Smaller events tend to come through regional brokers and affinities, with larger events coming from national brokers. There are around 20 insurers and syndicates with significant capacity for larger events and only around 10 specialist brokers. However, there are many general brokers with individual events accounts."

Showing the potential scale of the market, there is speculation that Michael Jackson's concert in the O2 arena could reach a premium of £4m for public liability and cancellation cover, although it has been a struggle to place this. Cover for such high-value events is often organised through the Lloyd's market because individual insurers rarely take on this level of risk. Market leaders include Lloyd's insurer Scotts, which is prominent in the cancellation insurance space, and Hiscox's Syndicate 33. As a result, many event specialist brokers act as wholesalers with facilities for placing business in the open market at Lloyd's.

Typical range

There are three main types of cover offered to event organisers. The first type is cancellation, which also covers curtailment, postponement, interruption, failure to vacate the premises and relocation. Meanwhile, property cover can insure up to a value of £100,000, including property in transit to the venue, theft cover and - sometimes - physical loss of money and gate receipts. The third and final class of cover is liability - both public and employee.

On top of these classes of cover, add-ons include exhibitors' cover, terrorism cover, infectious diseases and non-appearance cover. Brian Kirsch, managing director at Event Assured, says that add-ons enable brokers to arrange all-risks policies for clients that are not always available through pre-packaged affinity schemes.

Weetman believes that cover for 'no-show acts' is important for music festivals: "Non-appearance cover is critical for musical events that are often dependent on one or two key performers."

The majority of event policies are for smaller events. Gosden notes many policies are taken out on request of local councils, in keeping with local authority licenses; most localities require event holders to have such a permit, for which they need public liability cover. As such, Gosden says that the market is dominated by clients looking for public liability cover.

Premiums start at £50 for liability and cancellation for small events but can run into six figures for substantial oversees events with extensive terrorism and weather cover. Wilkinson explains: "Every event is different, so there is no standard premium. Smaller events can be packed with premiums as low as £50 but they do not always need everything, so it can be better to underwrite every event on its own merit, although this is not cost-effective at the lower level."

While rates are rising across insurance, there is no such movement in the events market. Kirsch expects premiums to stay steady until the UK pulls out of recession: "Demand is down, so premiums are unlikely to rise in the near future." However, there has been upward movement for weather cover.

Cancellation

Surprisingly, there are no standard excesses for cancellation cover. Excesses apply for reduced attendance, or where there is a history of cancellation - which is where an excess can be applied. Weetman says: "Clients either claim for all or nothing for cancellation cover, so excesses are not appropriate." However, liability and property cover have a standard excess of approximately £250.

Awareness of the benefits of event insurance is low, however, things are improving, though painfully slowly at times. The Country Landowners Association's huge annual event was cancelled in 2007 after the venue flooded, a wake-up call for the organisers that bought cover for the first time from Event Assured in 2008.

Showing the market's potential, Kirsch estimates that two-thirds of event risks go uninsured: "People have become more aware of weather risks due to a couple of bad summers and we are seeing more enquiries now than in previous years. However, it is important to remember that it is not always the obvious things that people think of that cause problems on the day."

Elizabeth Seeger of Hiscox's Lloyds Syndicate 33 has noticed that some risks receive more enquiries depending on the news headlines. She has noticed an increase in the number of sporting events now looking at terrorism cover since the recent attack on cricketers in Sri Lanka, as well as greater numbers of enquiries surrounding public services disruption as a result of the recent strikes in France.

A large number of commercial clients can be involved in event organisation. To increase awareness, brokers need to promote the benefits to all of these clients. Gosden believes that one drawback for brokers exists where the market can be difficult to access and may struggle with favorable terms or commission.

However, while bad summer weather has helped drive awareness of the need for event insurance, it has also driven up premiums for weather cover. Fraser explains: "There have been claims ranging from major sporting events such as tennis and cricket, military shows and countryside fairs to outdoor music festivals. Major problem areas have been flooded venues, waterlogged car parks or persistent rain during a sporting event that does not allow any player at all."

Extra benefit

Insurers can help clients prepare for bad weather, reducing the risk of cancellation and the costs and reputational damage associated with it. Wilkinson believes that brokers should raise the issue of the additional services that insurers can provide: "Cancellation insurance is not just about reimbursing a total loss but can provide interim payments to help an event to go ahead. For example, paying for the additional cost of hiring a new venue, or putting down matting and walkways when bad weather risks cancelling an outdoor event, is a benefit a good insurer will provide the client. A relocated or rescheduled event is a far better solution for an organiser and the insurer."

Insurers and brokers can also add value to clients by offering help with health and safety. All events will need health and safety risk assessment but not all brokers are making their clients aware that help is available. Kirsch notes: "There is a higher, conscious awareness of health and safety, especially for public events, though we have not seen many brokers actively selling help with risk assessment. We have the ability to put brokers and clients in touch with a consultant to help and brokers need to make clients aware that this kind of help is available."

Increasing numbers of clients are searching the web looking for event insurance, both individuals looking to cover private events such as weddings and larger professional event organisers looking for much wider policies. If you search for event insurance on the internet, you will see large insurers such as Hiscox listed alongside specialist brokers and affinity offerings.

Kirsch believes that it is important to have an internet presence and that we will see more business being placed on the web. Event Assured will write any event up to a value of £300,000 in any location in Europe through its website. Kirsch comments: "Most weddings and smaller event organisers will search for cover on the internet and will see many options for cover but the market is totally saturated. As with personal motor cover over the web, the most expensive policy can often have less cover than some of the cheaper options. Wedding insurance is sold on price over the net but the little differences in policy limitations can make a big difference to the cover."

Leamington Spa-based Heartland Event Insurance offers cover online for events with revenue of less than £500,000. However, Weetman believes that there is a size limit for events traded on the internet: "Some events require face-to-face interaction with clients and bespoke solutions because the risks of each event are individual. Online insurance is just not appropriate for the larger events."

Wilkinson believes that we will continue to see growth in the number of event insurance policies sold online, however, these will be confined to the smaller end of the market. Large-scale summer music festivals such as Glastonbury and T In The Park have such large risks that few insurers will take on their risks individually. Commonly spread between several Lloyd's insurers, this level of event organiser will continue to need the advice that a broker can give. Wilkinson notes: "There is a place for low-value online trading, especially for competing with affinities, though every event has unique needs and nothing beats the involvement of a good broker and underwriter."

SUMMER EVENTS: CREDIT CRUNCH CASUALTIES

April 2008 - The Isle of Skye music festival was cancelled due to the organisers racking up £500,000 in debts as a result of not selling enough tickets.

March 2009 - The Heavenly Planet music festival in Reading was cancelled due to a cash crisis after attracting 40,000 people the year before. The event, aimed at families and young festival-goers, was supposed to be a 'musical celebration'.

March 2009 - The Society of Motor Manufacturers and Traders announced that it has cancelled the 2010 British International Motor Show, Britain's largest consumer exhibition, due to economic uncertainty.

April 2009 - The Red List Live festival in Kent was cancelled by organisers as an "unacceptable risk in the current economic climate". Red List Live was due to take place in June and to be headlined by big name bands The Wombats and The Zutons.

April 2009 - An annual multi-cultural event in Oxford was cancelled due to lack of funding. Oxford City Council said that it could not afford to put £8,000 towards the Oxford Mela because it needed to make savings of £5.3m this year.

May 2009 - The Celtic Rally Festival in Torpoint (Cornwall) was cancelled less than a week before it was due to take place, leading to approximately 1,500 attendees being turned away and in spite of 500 being camped at the venue at the time of cancellation.

FIVE COMMON EVENTS INSURANCE MISCONCEPTIONS

Brian Weetman, managing director, Heartland Event Insurance

1) "We'll take out event insurance nearer the time."

Some organisers choose to take out cancellation insurance close to the start date of an event, perhaps within a month or two. It is often misconceived that doing this is cost-effective. The opposite is true because insurance premiums are likely to be lower and offer improved cover the earlier the insurance is taken out.

2) "Our employees are already covered at events through our general office and business insurance policy."

Typical office policies are designed only to cover the risks associated with the administration and running of an office. Always check with your insurer because it is a legal requirement to have adequate employer's liability insurance in force.

3) "Event insurance is all about price."

Each policy has variations in its wordings, which can be the difference between claims being paid or rejected. Each organiser is different and therefore needs tailored cover.

4) "Our public liability risks are covered for our event through our general office and business policy."

Typical office policies are not designed for the more hazardous risks associated with organising a live event. If your insurer does not know that you are an event organiser and had it noted on your policy, the chances are you are not covered for this activity.

5) "We don't need cancellation insurance because our event will never be cancelled."

A recent study concluded that around 40% of organisers have had an event disrupted or cancelled as a result of circumstances beyond their control.