Why did Events Insurance become so expensive?

From sport to theatre to live music, it used to be relatively easy to insure an event. But now, organisers are feeling the squeeze. 

by Duncan Fraser, Global Practice Lead of Sport and Entertainment

Last month, the 2021-22 season of the Ashes came to a close. English cricket fans may have been disappointed by the result, but from my perspective, it’s almost a miracle that the test matches could go ahead at all. 

The world-popular cricketing event came at the end of another year of pandemic-induced disruption, and took place during an exponential surge in global Covid cases. Just weeks before the competition was due to begin, there were concerns that it might have to be cancelled all together.

Travel restrictions and infection rates would have been enough to threaten the event, but there was more to come. Ahead of the tests, both teams were rocked by scandal and condemnation. Then, when the players finally made it to the pitch, a once-in-a-decade weather phenomenon brought torrential rain that caused play to be delayed, cut short or abandoned on multiple days.

The event organisers must have breathed a huge sigh of relief once the final result was called. Any one of these disruptions could have been enough to railroad the whole affair – we have certainly seen events cancelled in the face of far less. But that doesn’t mean that they have got off lightly.

The Covid legacy

After two years of lockdowns, cancelled events and endless rescheduling, event organisers are starting to see the light at the end of the tunnel. As restrictions are being lifted in many countries, ticket sales for theatre shows, sporting events, music festivals and more are reaching record highs. For many event organisers insurance has in fact been their primary income source for the past two years, so this increase in ticket sales is a very positive sign. 

While the threat of another lockdown is ever-present, things are starting to look up. Unfortunately, the financial losses caused by two years of disruption isn’t the only legacy of Covid. For event organisers, the pandemic has caused another considerable problem – it has become much harder and more expensive for them to buy event insurance. 

Events insurance squeeze

Before 2020, it was relatively easy for venues and organisers to purchase cover for events. However, the last two years have caused huge shifts in insurers’ attitudes. At a global scale, insurers have traditionally received around $500 million of premium for event insurance annually. But since March 2020, they have paid out around $6.5 billion in event cancellation claims. This huge deficit has left insurers reluctant to cover anything but the safest risks.

This decrease in insurance capacity has, in some circumstances, left many venues and organisers under-insured or with no insurance. And as we’ve seen with the Ashes, event cancellation and contagious diseases aren’t the only threats organisers face. Extreme weather, reputational damage, and even cyber attacks are growing risks too – and as these threats are on the rise, insurers are becoming more careful about what and who they choose to cover.

As insurance brokers, we have seen the impact that these restrictions are having on our clients. But we’re also working hard to do something about it.

Supporting event organisers

At Howden, we’re working on multiple fronts to offer meaningful support to venues and event organisers who are feeling the impact of the hardening insurance market. 

One of our London-based directors James Davies, was a key instigator in lobbying the UK Government to provide financial protection for events impacted by Covid-19. By pulling together major insurers and buyers, his efforts helped convince the Government to step in. The resulting Live Events Reinsurance Scheme made it easier to access cover against the cancellation, postponement, or relocation of events due to new government-imposed restrictions or lockdowns. 

The scheme is among the few in the world to cover almost all live events and not put a cap on costs claimed per event. It is an amazing support for UK-based events, but unfortunately it doesn’t help our international clients. So we’re also working with insurance providers and the ILS market to create viable, accessible solutions for events around the world. Using our in-house data and analytics specialisms, we are developing models to help insurers feel more confident in providing cover for our clients, wherever they are.

Evidence-based cover

In the current climate, insurers are requesting exacting standards from their potential customers. With such high demand, they can pick and choose who they cover, so we are working closely with our clients to ensure that they meet the rigorous standards required of them.

The exact details of these requirements depend on the type of event being organised. However, an example could be a music performance at a major venue. For an event like this, insurers will want to see that the organisers are taking every element of risk management seriously. From crowd control to cyber security and protection from the weather, we work with our clients to ensure that all their bases are covered. And with our data-driven analysis, we can create more compelling cases on our clients’ behalf.

Looking forward

While the London market is still slow, we are seeing recovery among insurers in the US and continental Europe – particularly in the Dutch and French markets. After being hit hard by Covid claims it is taking London insurers a little longer to bounce back, but I fully expect to see it catch up in the coming months. This should hopefully ease the squeeze that our clients are seeing, if just a little.

In the meantime, we are working hard to help our clients access the cover they need at the best possible premium. If you are looking for cover for your sporting or entertainment event, get in touch to find out how we can help you.