Defined assurance

Travel and activity disruptions during the onset of the pandemic have highlighted the vulnerability of events. Kevin Stevens, head of industry practices, Chubb Asia Pacific tells Karen Yue that event cancellation risks can be managed, and it is up to organisers to determine how they want it done

It is often said that insurance comes as an afterthought. Did Chubb see a spike in event insurance enquiries as event plans were upended by the Covid-19 pandemic?
It is not unusual to see a spike in insurance enquiries just when something catastrophic might impact plans, whether it is a typhoon heading towards the city, civil unrests, a volcanic ash cloud or a heightened threat of terrorism. Covid-19 is no different.

Successful events would have been planned many months or years in advance and organisers would have created an event management plan. The event organiser should assess their risks and decide how they will be managed.

Some risks can be reduced by taking certain actions, such as managing security in-house or working with a specialist security services company. Some risks can be eliminated, such as by selecting a purpose-built venue versus one that is not fit for purpose. Some risks can be transferred, such as in contract via an indemnity from suppliers or by purchasing insurance. Some risks are considered low and the organiser decides to retain them.

However, not every risk can be transferred to insurance, so the event organiser will need to weigh the cost of insurance against their perceived risk. Insurance companies provide insurance for fortuitous events, in other words, something not reasonably foreseen or expected, and do not provide insurance for known events.

Here is a scenario: insuring an event during the typhoon season in Hong Kong is certainly possible but it will be more expensive than out of season. Seeking insurance as the typhoon approaches will be a fruitless exercise. Plan well and early, including the purchase of insurance to secure protection against fortuitous events disrupting your own event.

Do you expect – or perhaps are already seeing – a stronger take-up of event cancellation insurance in the immediate future when events resume?
Compared to other parts of the world, the take-up rate of event cancellation insurance in Asia has typically been low. This has partly been a matter of the lack of awareness that the insurance product exists and the organisers are prepared to take on the risk themselves, or have not budgeted for the cost of insurance in their plans.

Has the pandemic altered event cancellation insurance coverage and premium, or led to the creation of new insurance products?
No two events are the same and therefore event cancellation policies are typically negotiated on an event-by-event basis to suit the needs and budget of the organiser.

Event cancellation policies typically contain exclusions for adverse weather in relation to outdoor events, national mourning, civil commotion, terrorism, non-appearance, and communicable disease. Event organisers will negotiate to extend the insurance to cover one or more of these excluded perils and pay the additional premium. I do not foresee any new exclusions being applied to a policy unless there is a known event that the insurer does not want to cover.

The event cancellation insurance market has been hit hard this past 18 months, with over 20 music festivals being cancelled, extreme weather impacting major events, and more recently the largest market loss resulting from Covid-19. I expect to see a number of insurers withdraw from the industry and those insurers that remain will adjust their pricing to suit the heightened risks and their increased costs of operating.

One of the common reasons for event organisers to not pay for event cancellation insurance, is that in the event of a pandemic or terror attack, the force majeure clause comes into play and they will not be compensated. What is the reality?
In my experience, not every force majeure clause reads the same and there are many that do not contemplate a pandemic.

The clause also works both ways. The vendors supplying to the organiser, such as venue or the artiste, may have strong force majeure or terms and conditions that prevent full recovery of paid funds. The organiser may have a strong force majeure clause in their ticket conditions and therefore are not legally obligated to refund the patrons, but public pressure or to protect their reputation may cause them to act differently.

Depending on how far in advance the event is cancelled, there will always be expense savings that can be made, but rarely are the full costs and expenses recovered. Event cancellation policies are in place to pay for the irrecoverable costs and expenses that have been incurred for a covered event.

Another top reason for rejecting event insurance, is that it is unnecessary and “extravagant” for local or regional events involving under 100 participants. Again, what is the reality?
The purchase of insurance often depends on whether an event is revenue generating and for profit, or if it is a community event. We have insured local and regional events of all sizes, protecting the revenue or just for the costs and expenses. Whether it is a fashion show, wedding, business meeting or local government show or performance, the organiser in each circumstance needs to weigh the risk of cancellation and decide if the cost of the premium makes sense to their budget.

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