The broker has called on the government to become the insurer of last resort for the sports and entertainment industry and warns of the potential ’carnage’ on the UK’s economy if these venues cannot get the insurance they need to operate
EC3 Brokers has called on the government to become the insurer of last resort for the sports and entertainment industry as well as underwriting part of the risk.
In its proposal on contingency insurance to the government, the broker hopes to dig British theatre and the sports and entertainment industry out of a Covid-19-induced financial hole.
The campaign called ‘Let, Live, Thrive’ supports all UK live events and proposes setting up a coalition of partners across the insurance and entertainment sector who are committed to safeguarding it.
James Davies director at EC3 Brokers told Insurance Times: “We are campaigning the government to become the insurer of last resort to cover pandemic lockdown with a standard contingency insurance.”
This would provide a lifeline to the sports and entertainment sector where the government insures event cancellation due to ”communicable diseases” in partnership with a consortium of London contingency underwriters.
EC3 which specialises in events and cancellation abandonment insurance, is working with several insurance players, one being broker Tysers who is working on a live music event plan.
Davies fears that if theatres and other live venues do not get up and running soon, they will go bust.
“The country’s economy will shrink significantly because of the amount of income that is generated by these events. It will be carnage,” he said.
It follows the lockdown in the UK forcing theatres and live music venues to shut their doors to the public in the interest of controlling the spread of the coronavirus, but now they are unable to get the commercial insurance they need to operate.
Insurer of last resort
EC3 joined forces with Tysers to work on proposals, but the prospect of affordable insurance being offered by the industry is scarce due to heightened risks.
With the contingency insurance market experiencing large losses since the pandemic started, Davies said underwriters cannot write any pandemic or Covid-19 related cover.
Contingency insurance indemnifies the policyholder against financial loss if the event is cancelled, postponed, abandoned or rescheduled for any reason beyond their control.
EC3 Brokers proposed policy wordings
Communicable Disease Extension (proposed wording)
1. This contract extends to include any loss directly or indirectly arising out of, contributed to, by, or resulting from and Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease.
2. For the purposes of this extension, Communicable Disease means any disease capable of being transmitted from any organism to another organism by means of any substance or agent. All other terms and conditions remain unchanged.
Communicable Disease Extension (For use on contingency non-appearance risks)
1. This Contract of Insurance extends to cover any loss directly or indirectly arising out of, contributed to, by, or resulting from any Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease.
2. Subject to all the terms, conditions, limitations and exclusions of this Contract of Insurance or any endorsement thereto, paragraph 1 does not apply to a Communicable Disease which, in the opinion of an independent healthcare professional approved by the Underwriters: 2.1. entirely prevents any Insured Person from appearing or continuing to appear in any Insured Event, Where 2.1 above is the sole and direct cause of the necessary Cancellation, Abandonment, Postponement, Interruption, Curtailment or Relocation of any Insured Event.
3. For the purposes of this extension, Communicable Disease means any disease capable of being transmitted from any organism to another organism by means of any substance or agent.
All other terms and conditions remain unchanged.
What will be the impact on the economy?
The following consequences could happen if productions and venues cannot secure insurance for Covid-19:
• With all theatres closed, box office income and ancillary trading is at zero
• Fixed costs remain high, including listed building overheads at £70,000 to £100,000 on average per month, meanwhile 70% of organisations will run out of cash by end of 2020
• The Job Retention Scheme has avoided large-scale redundancies to this point, but without intervention job losses could be over 200,000
• Loan schemes are challenging to access
• Social-distancing measures will allow for only circa 20% of capacity
• Ecosystem of the sector cannot easily be rebuilt from scratch if lost
• If theatres are forced to shut down permanently there will be a loss to HM Treasury of VAT payments which is over £130m annually for West End theatres alone, and all related hospitality
• Major risk to towns and cities around the UK where investment in venues and jobs has led to regional powerhouses of production
Source: EC3 Brokers
Reopening
Although some venues have reopened with social distancing, the nature of live events means that people are in a confined space and this makes theatres more vulnerable to closure.
Many producers only rent a theatre or book a tour for a short period making them unable to recoup losses. Theatres also rely on investors to raise capital, but with no insurance, funding will also be absent.
“Reopening is the difficult bit. You can’t make a profit from 30% of a theatre [seated], you have to be in the 70% [bracket]. The income generated by theatres is down to ticketing, merchandise and drinks or food. Without any of that [venues] are not going to be able to generate enough income to carry a show especially for large shows with a star.
”It is likely that we are not going to have a pantomime season which generates a significant amount of income for theatre owners. I think it’s likely that major Westend companies are going to struggle – the Nimax, and The Really Useful Group are going to be in a spot of bother,” he said.
Spiral
Davies suggested quantifying the loss and setting aside capital to insure the risk could be one solution.
In July the government set aside £500m in a scheme to help the TV and film production industry struggling to secure insurance for Covid-related costs as part of its £1.57bn Culture Recovery Fund.
At the time of the scheme’s launch, chancellor of the exchequer, Rishi Sunak said the targeted scheme will help fill the gap created by the lack of available insurance, protect tens of thousands of jobs, from actors and directors through to camera operators, costume designers, and runners. He cited the sector as being worth over £12bn to the UK’s economy.
Davies continued: “I don’t know if this fund has been used, but it generated confidence, the TV and production started filming again with social distancing.
”You can’t keep all your staff unemployed in the ’unknown’ that these events don’t go ahead. Even if they do go ahead, [there] might not be enough staff due to redundancies just to keep your company alive. It is a spiral – without the ’confidence’ no one is going to step up to the plate.”
Slightly differently
When asked what the insurance industry could do, Davies said: “It’s going to take an element of doing things slightly differently and looking at risk in a different way.
“It is about getting confidence back and the premium coming into the market again.”
He suggested not charging a premium for the risk upfront and instead doing it on a pro-rata [or] monthly basis.
Therefore, in the event of a second lockdown, the policy could be cancelled, and claims made, which could also benefit insurers by saving them money.
Read more…Premier League poised for kick off but insurance concerns loom
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