Government must take leap of faith to mend ‘gaping hole’ in cover for live events

Holding a summer festival in the great British outdoors is an inherently risky project, as anyone who has trudged through a muddy field to catch their favourite band will attest.

Coronavirus has added huge new layers of uncertainty into what was, until spring last year, a booming sector of the UK economy.

The onset of the pandemic saw all but a tiny handful of live music concerts and festivals cancelled in 2020.

All social distancing rules are due to be relaxed by 21 June, which is about the same time that thousands of tents were due to be pitched at Glastonbury, under prime minister Boris Johnson’s proposed timetable for unlocking society.

However, the organisers of the UK’s biggest and most renowned music festival have already announced that this year’s event has been cancelled. They were followed by the British Summer Time festival, which confirmed at the end of March that the annual Hyde Park extravaganza is off for the second year running.

The chief reason why promoters are getting cold feet is the lack of availability of insurance cover for events. According to Lloyd’s annual financial results, published on 31 March, events cancellation accounted for the biggest share of the £6.2bn sums it had to pay out due to the Covid-19 pandemic.

“Insurance cover against communicable disease in event cancellation policies is currently nowhere near the levels seen in 2019 because of significant losses,” said Alastair Blundell, head of general insurance at Biba.

Speaking at a House of Commons debate on 23 March, Conservative backbench MP Steve Brine confirmed that “organisers cannot enter into the usual planning for 2021 without an insurance solution in place”. He added that the commercial insurance market for events cancellation is “unlikely” to mobilise until “at least” 2022.

‘Gaping’ insurance hole

“Organisers of festivals and live music events can’t go ahead with events with such a gaping hole in their communicable disease cover,” explained Tim Thornhill, director of the entertainment division at insurance brokers Tysers.

He has been working with other industry figures and bodies on a scheme for the government to underwrite cover for Covid-19-related event cancellations.

The initiative builds on the success of last year’s government-backed £500m film and TV production restart scheme, which Thornhill also worked on.

The initiative was so successful in enabling companies to secure insurance cover that the overall level of TV and film production in the final quarter of 2020 was at near record-breaking levels.

The mooted package for the government to underwrite event cancellation insurance would sit alongside existing policies.

While the first part would be underwritten by London market syndicates, the government would shoulder the risk for the communicable disease perils that the commercial market is currently shunning.

Only costs would be insured and not profits, said Thornhill, which for festivals equates to around £1.27bn.

To further mitigate the scale of the government’s potential liabilities, the terms of the government underwritten element of the cover would be restricted to cancellations specifically resulting from outbreaks of Covid-19 amongst spectators, crew or artists.

The proposed scheme could also embrace sporting events which rely on spectators, like the Henley Regatta, but not those that receive the bulk of their income from broadcasting rights, such as cricket and football.

Taking just the live music sector, the government’s total payout would be around £227m in the unlikely event that every UK festival and concert was forced to cancel due to coronavirus, Thornhill calculated.

And the scheme would only operate as long as the commercial market is unable to stand on its own feet. He added: “We believe we have a workable solution that mitigates losses to the government.”

Thornhill additionally noted that “while there is no incentive for the commercial market to put this in place, the government does [have a motive]”, as the scheme could save the Exchequer on furlough and benefit payments for events staff , who would be back at work if their industry was up and running again.

Misguided perception

Liberal Democrat MP Jamie Stone hailed the package in parliament as an “investment opportunity” that “will pay for itself” through the social and economic benefits that would flow from restarting the events industry. Thornhill said the total economic benefits of the package work out at £9.4bn.

The package has been presented to the Department for Digital, Culture, Media and Sport. However, after a flurry of interest earlier this year, things have gone quiet.

The announcement by festivals like Reading that they are pushing ahead regardless may suggest that there is no reason for intervention, but this picture is perhaps misunderstood by the government and media, said Thornhill. “The perception is that everything is fine, but it’s not,” he added.

Many promoters, for example, cannot draw down the revenue from ticket sales, which agencies keep in escrow accounts to be paid out post event or refunded to customers if necessary.

In the meantime, organisers face hefty bills for hiring the specialist contractors required to run their events.

Those providing these services must generally be signed up at least two or three months ahead of the event, which will be the crunch point when promoters will decide whether to go ahead or not.

The government has told advocates of the events cancellation scheme that the initiative will be assessed once its pilots for live events, which Johnson confirmed earlier this week, have taken place.

However, Thornhill said the full picture from these pilots may not be clear until June and the insurance industry then needs two to three months to get the scheme up and running.

This timescale would mean the scheme potentially not kicking in until August - around the time when the vagaries of the British weather means that the festival season is winding down.

Taking a ‘leap of faith’

A sticking point could be government sensitivity over potential reputational damage in the wake of criticisms that it effectively subsidised people to expose themselves to the risk of catching Covid-19 last summer, thanks to the Chancellor of the Exchequer’s ‘Eat Out to Help Out’ dining scheme.

However, to mitigate these concerns - for festivals at least - the government has recently tweaked its coronavirus guidance to encourage fresh air activities.

Caroline Dinenage, culture minister, told the House of Commons that the decision on the scheme is with the Treasury “right now” and is “still very much on the table” – she added that it would represent a “leap of faith”.

Time is running out for events organisers though, warned Brine, adding that it “is almost too late for 2021.”

Biba’s Blundell agreed. He said: “A government supported compensation scheme planned now, would help to get both the events sectors up and running and also the insurance markets for primary risks.

“Delaying any such plans for a compensation scheme for business events, live music and weddings could delay events going ahead from the point that it is safe to do so.”

The government can’t do much about the vagaries of British weather, but getting an insurance package in place could save the summer for festival promoters and millions of concert-starved music fans.