By Susan McGuirl and Peter Tempkins
The live events business had a grim 2020 due to the COVID-19 pandemic, but there have been signs of a recovery.
Live show streaming, drive-in concerts, and socially distanced performances are helping fill the gap. [1] Outdoor stadium sports like football, baseball and tennis have resumed with attendance limitations—more fans are expected into stadiums as vaccination rates increase.
Barring another wave of COVID-19 infections, more outdoor events are expected to open with limited or even full capacity by mid-2021, with indoor events returning in 2022. A return to normalcy can’t come soon enough for an industry that saw revenues from live events contract 69% in 2020.[2]
But venue owners, organizers and promoters in the live event business know that it will be a long time before things return to normal. Having venues open to the public, acts to book and a vaccinated populace eager to pay for live performances won’t ensure success — particularly when the live events business can’t secure or afford insurance coverage.
A hard insurance markets makes things worse
The potential for a rebound comes as event planners have faced a hard market going on more than a year, with premiums rising as carriers have become more stringent in their underwriting criteria.
Live event companies are able to get cancellation and excess liability insurance, but at inflated costs and with exclusions for pandemics, epidemic and communicable disease. Excess liability covers claims that exceed the limits of the underlying policy.
A year after the COVID-19 pandemic began, organizations have had difficulty procuring insurance for claims related to the coronavirus, communicable diseases or pandemics. (In general, underwriters still have capacity for general liability, workers compensation, auto and property, with prices remaining fairly stable.)
Cancellation insurance: Tokyo Olympics casts a cloud
A sense of unease pervades insurance markets over the Tokyo Olympics, postponed in 2020 and set to commence on July 23, 2021. In the case of a postponement or cancellation, insurers face an estimated $2 billion to $3 billion loss — the largest such claim ever in the global live event cancellation market.[3]
Prior to the pandemic, natural disasters resulted in a greater number of event cancelations, putting pressure on the market. COVID-19 could result in claims that force underwriting syndicates to give up profits they've earned over the last 25 years.[4]
Despite the scale of their losses, insurers are able to pay claims at their full value. However, the sheer number of claims has resulted in payment delays of six months or more. And when there is coverage available, event planners have faced escalating premiums and restrictive terms.
Excess liability coverage: Market still reflects past losses
The market for excess liability (or umbrella) insurance has been under stress for several years. Getting this insurance, which extends event liability policies, can be a challenge given declining capacity and higher prices.
Huge losses continue to be a drag on the market. It's pushing brokers to adopt complex strategies such as layering coverage that involves multiple underwriters to meet higher loss limits.
Despite optimism of a full return to live events across sports and entertainment, the disruption of the pandemic will have a long-lasting impact on every aspect of hosting live events.
Contact HUB International’s team of sports and entertainment industry experts to see how their deep expertise in insurance for live events, as well as on the industry’s exposures and risks will help you to navigate a fraught environment.
[1]Billboard, “Here Are All the Drive-In Concerts Happening Due to Social Distancing,” October 21, 2020.
[2]IBISWorld, Concert & Event Promotion in the US industry trends (2016-2021), accessed March 22, 2021.
[3]Reuters, “Insurers face 'mind-blowingly' large loss if Olympics cancelled,” January 27, 2021.
[4]The Center for Association Leadership, “How the COVID-19 Pandemic Affected Event Cancellation Insurance,” February 9, 2021.