Despite facing heavy losses, the event cancellation insurance market remains open but capacity is limited and infectious disease cover is hard to come by, Marsh JLT Specialty told CRE.
Event cancellation has been one of the hardest-hit insurance lines during the coronavirus outbreak as sporting fixtures, events, conferences, trade shows and film and TV production have been postponed or cancelled. Market losses from event cancellation are unknown, but are likely to run into several billions of dollars, according to Edel Ryan, head of entertainment at Marsh JLT Specialty. Losses could rise further if events are cancelled into 2021, she told Commercial Risk Europe.
Allianz revealed that it has recorded €200m of cancellation losses in the first quarter, while Hiscox said it faces cancellation claims of up to $175m. Swiss Re recorded $253m of claims and Munich Re said it booked €973m in manmade losses, mostly due to claims stemming from the cancellation or postponement of major events.
But despite the losses, the event cancellation insurance market remains open, explained Ms Ryan. “Where there is a risk, there will always be a market. The traditional event cancellation market may not exist as it did before the pandemic but the idea that there is no event cancellation market is unthinkable. We will find a way back from the crisis,” she said.
Coronavirus is still front of mind for buyers of event cancellation insurance, and most are enquiring about cover for infectious diseases, said Ms Ryan. Infectious disease cover, excluding Covid-19, was still available in the event cancellation market until March. But most markets have now withdrawn this protection, said Ms Ryan. A few will, however, offer cover for specific named diseases, such as foot and mouth, she said.
“Blanket cover for communicable diseases is no longer available in the event cancellation market,” said Ms Ryan.
Obtaining wider event cancellation cover, such as for weather or terrorism, is also now more challenging, especially for large events that require high levels of capacity, explained Ms Ryan. “Capacity is undoubtedly an issue. It’s not about the premium, but about the capacity of their book. This will make it harder to insurer large events, but not impossible,” she said.
Insured events in 2019 that have been postponed until next year because of Covid-19 will typically see their cancellation cover roll over, which will include infectious diseases where covered. However, when it comes to insuring new events, rating and capacity is mixed, she explained.
“There is no consensus among insurers of what the market will look like going forward, reflecting the current situation where insurers are still trying to quantify losses. As of May, it appears that any mass gatherings before the end of 2020 are unlikely. So until losses are quantified and the quantum known, it is difficult to predict how the market will respond,” said Ms Ryan.
“Timing is a big factor. Some markets will not offer terms for events this year but will consider those being held next year. However, some insurers will consider events this year but not in 2020,” she said.
Marsh is able to place event cancellation cover for events in 2020, but the market is aware that a second Covid-19 wave could lead to events being postponed. “We are handling quotes now [for events in 2020] and we expect to secure terms,” said Ms Ryan.
The pandemic will dramatically change how contingency and event cancellation risks are underwritten, she continued. “There will be a lot more underwriting and greater onus on brokers to provide a comprehensive presentation of the risk. The days of giving just brief detail in order to get a rate are gone. Insurers will rely much more on data and analytics and will require detail on the risk management of projects,” she said.
“We are actively encouraging clients to engage with underwriters, to get to know the market and meet their insurers. This market has been very price-focused in the past. But clients will want to know what they are insured for and engage with the market,” Ms Ryan added.
In the past, event cancellation risks were seen as localised, with weather the most likely cause of loss. However, by offering cover for infectious diseases, the contingency insurance market is exposed to a global event affecting almost all polices. “Few foresaw this pandemic; the impact is catastrophic for the event cancellation market. It will undoubtedly change attitudes and the appetite of insurers going forward,” said Ms Ryan.
The market’s response has generally been pragmatic, she added. In her experience, policies have responded as expected. Insurers and policyholders have worked together to agree the best way to handle claims.
Ms Ryan noted that the timing of any decision to cancel or postpone an event directly impacts the loss, with early cancellation usually incurring fewer costs.
“Event cancellation is a critical exposure for many organisations, and there will be some that may not previously have factored this in and that have subsequently suffered losses. As such I would expect interest in event cancellation cover to increase,” said Ms Ryan.
“Most of our clients are in the creative industries and have a can-do attitude and want to keep the show on the road. And the contingency market shares this ethos and is a lot more flexible and creative than the traditional property insurance market,” she added.