Insurance for major events a balancing act

Major concerts, shows and events can be a huge investment but can carry substantial risks such as,  unavoidable cancellation, abandonment or postponement.  Crombie Lockwood Senior Broker, Daniel Rosser talks to 'The Press' about special event insurance. 

Concert Cancelled

New Zealand is now in the spotlight for international events that have added to an already exciting entertainment calendar this summer.

The Cricket World Cup, the Women's Golf Open, the Foo Fighters concert and a number of music and food festivals are keeping punters entertained and organisers awake at night.

Event promoters make huge investments and carry substantial risks, whether it is a high-profile concert, an international conference, a promotional competition or even a wedding.

Most events are insurable, from sports fixtures, concerts, performances, fetes, and fundraising events to the rather unusual and gimmicky promotional events.

Take, for example, the hole-in-one competition at last year's New Zealand Women's Golf Open. The organisers put up $20,000 for a successful hole-in-one shot for the invited professionals, but even if Lydia Ko or her colleagues had holed out, the payout would never have hit the bottom-line of the New Zealand Open. Like most golf tournaments, this promotion was covered through a specific one-off Prize Indemnity Insurance.

Another event that has caught the country's imagination is, of course, the Cricket World Cup, and within it the Catch A Million promotion.

The lads who have caught the sixes have to wait and see if their collective prize of $250,000 will grow to a million dollars if the Black Caps win the final.

This competition provides an intriguing scenario for insurers, if they were approached by the sponsor for insurance.

The probability of anyone catching a six during an entire World Cup, and claiming the $250,000, would have been relatively high - as we have seen - and it may have been difficult to insure that sum.

However, some insurance company may have taken an educated punt to cover the final part of the prize money, based on the historical data that the Blacks Caps have never reached the final.

Event insurance is a niche product. In New Zealand only a few companies facilitate cover. In 90 per cent of inquiries Lloyds in London would be the first point of call for one-off events.

Lloyds, the oldest insurance company in the world, has staff specialised in assessing the risks around events and any other odd competition or gimmick.

In most cases event organisers are concerned with insuring irrecoverable costs and expenses incurred as a result of the unavoidable cancellation, abandonment or postponement.

In addition to these lost costs, loss of profits which would have been earned had the event gone ahead are insurable, assuming that they can be satisfactorily quantified.

Naturally, insurance companies may later try to retrieve their payout from the absent band or guest speaker, but at least the promoter and visitors will not be left out of pocket.

In the case of conferences or music festivals, it may be hard to prove what impact one particular missing band or guest speaker would have on the attendance levels, especially if the event has a large number of performers or speakers. In most cases, the insurance company would negotiate a settlement based on statistical data or how many punters want their money back.

The other obvious threat to outdoor events like sports, concerts or festivals, is the weather.

This type of insurance must have been around for a while as it carries the intriguing Latin phrase Pluvious Insurance, and covers not only ticket refunds but also other costs like stage-builders, venue hire, staffing salaries and expected profits.

In case it rains, there are two types of claims - for when the event is cancelled, and also for when the event goes ahead but organisers claim loss of revenue.

In the second scenario, it may prove difficult to agree on how many people stayed at home because of rain, and in most cases the insurers will fall back on statistical information about the event, the band and the venue.

In other cases, like last year's sold-out and drenched Rolling Stones concert in Auckland, there can be no claims from those fans who simply didn't use their ticket.

In case you want to insure your event against rain, just make sure you do it at an early stage and don't leave it until you see the long-range weather forecast.

After all, you can't insure for something you know is going to go pear-shaped.

To learn more about event cover make an enquiry and we'll contact you.

* Daniel Rosser is a senior insurance broker at Crombie Lockwood

Source - The Press