Cover your back

Does the thought of event cancellation or the loss of a key performer bring you out in a cold sweat? With the worsening unpredictability of the weather, natural disasters, terrorist threats and travel disruption, cancellation insurance is becoming a vital piece of armour for arts organisations and events companies.

A performer cancellation, venue fire or flood, or transport delays (bad weather, mechanical breakdown or strike) could mean major disruption to your event. With cancellation insurance you can protect income that depends on the event going ahead, or just cover specific costs such as venue hire, artist accommodation, travel and marketing. Even if it’s a free event with no ticket revenue at stake, cancellation insurance can cover incurred expenditure. Cancellation insurance is often perceived as expensive but in fact it’s infinitely flexible.

What can you insure against?

• Adverse weather for outdoor events: a water-logged site deemed too dangerous by the Health & Safety officer, or staging declared unsafe due to high winds

• Venue closure due to fire, flood, failure of safety curtain, sanitation problems or access being denied

• Non-appearance of artists due to
illness, injury or travel delays

• Terrorist attack or threat at the venue or in the vicinity.

The arts present some major implications for insurance, so it’s important to work with a specialist broker who understands your work. Many arts organisations are still not buying specialist policies – often overpaying for inadequate cover because of limited underwriter understanding. Rocketing liability rates hit hard as ‘compensation culture’ set in, and some events have struggled to get cover at all.

Cancellation cover can replace lost revenue and reimburse expenditure incurred from an event which is necessarily and unavoidably postponed, abandoned, cancelled, curtailed or relocated in circumstances beyond your control. For artist managers, it can protect commission income streams for high-earning performers.

What can be covered?

• Your irrecoverable costs & expenses

• Loss of revenue or net profit

• Additional expenses to reduce a loss

• Damages resulting from failure to vacate a venue for which you are legally liable under contract

• Future event protection to minimise adverse effect on subsequent events in a series. You can also extend your cover to include:

• Terrorism

• Enforced Reduced Attendance – if a specific incident impacts on attendance, for example, a road closure if this is the only route into the venue

• Foot and Mouth Disease – particularly important in rural areas

• National/Court Mourning – if the venue closes due to the death of a Royal Family member or if the venue has to be used for a funeral.

What’s not covered?

Pre-existing medical conditions, lack of interest/ticket sales and financial insolvency of the parties are standard exclusions – and pencilled dates without contracts or letters of agreement cannot be claimed.

How much should I insure?

It may not be worth your while to insure every event or artist for every contingency – some festivals and artist managements are used to absorbing attritional losses of around 5% in a normal year. You know where you’re most exposed.

• Artists/events: you might decide to insure only your biggest artists or your most lucrative events.

• Period: you can choose to either have an annual policy to cover all of your events or just specific tour dates.

• Perils: look at your contractual obligations – which perils would hit hardest? Illness/ injury to individuals? Venue issues like flood, fire, loss of power, strike? Transportation – mechanical breakdown, strike, weather?

How much does it cost?

The premium is calculated by applying a rate percentage to the total sum insured. The rate can range from 1.0% to 3.5% depending on factors such as artists’ ages, cancellation loss history, the level of income generation and whether the event is indoors/outdoors. On the example given, the premium would range from €3,290 to €11,515.

Be smart: identify your weak spots, quantify the potential impact of cancellation and get specialist advice to make sure you don’t pay more than you need to.

For an artist manager, if you chose to cover your top five earners, for example, the insured schedule of artists may look something like this: