Event Cancellation Insurance and COVID-19: Where Do We Go From Here?

With the global spread of the COVID-19 coronavirus and its recent impact on major events across the United States, event cancellation insurance has once again been thrust into the spotlight, reminding everyone why this coverage is so essential.  The question is, what will happen moving forward with the coverage in terms of market availability and rates?

Given the uncertainty of the prevalence and spread of COVID-19 in the U.S., state and federal government response—and the potential long-term social and economic effects—we’re left with many more questions than answers.

Q&A With Alive Risks’ Entertainment Underwriting Manager, Debbie Spinner

Debbie Spinner, Underwriting Manager of Alive Risk, shares her thoughts in a Q&A on how COVID-19 is impacting the markets, and what she sees in the near-term future of event insurance.

Clearly, everyone’s asking about event cancellation coverage.  What should retail agents and insureds know?

Check your contracts and look for any provisions that may excuse yourself from performance without penalty.  Next, review your Event Cancellation policy to see if coverage will be triggered for COVID-19.  In most cases, coverage for communicable disease would need to have been purchased through an endorsement for there to be coverage for an event canceled by COVID-19.  There may be other terms, conditions or limitations that may be a factor.

Are there any markets available for coronavirus coverage at any cost, for unlimited budgets or high-net worth individuals?

In a word, no.  Someone on All Risks’ leadership team said it best, “You won't find coverage.  It would be like insuring a building on fire.  It’s just not happening until they know more about it.”

From a historical standpoint, where does the market stand now with regard to rates and availability?

The 9/11 tragedy saw event insurance rates spike to their all-time high.  Over time, we saw rates gradually came down, once a sense of stability returned, and given the understanding that it was essentially a singular event.  Up until recently, rates have been as low as they’ve ever been with broad coverage terms and conditions.

What we’re seeing now is a major spike in coverage rates.  In the end, COVID-19 could have a greater impact than 9/11, in that we have a far greater degree of uncertainty, on top of the potential to extend for years in a cyclical manner, with “waves” of outbreaks based on seasonality.  The huge variable is progress made toward an effective vaccine, which we likely won’t see until 2021 at the earliest.  Although getting coverage for COVID-19 most likely will not be available for quite awhile, the potential losses from COVID-19 will impact the rates for the foreseeable future until the full extent of losses are known and what insurers will incur.

What would you say to promoters of upcoming events, large and small?

If you don’t have an Event Cancellation policy in place currently, you will not find one that would provide coverage for COVID-19.  There are still many other perils that could impact an event from happening and it’s still a good idea to consider an Event Cancellation Policy, even though it most likely will not cover for COVID-19.

Where do you see the event insurance market headed?

It appears that carriers are approaching the COVID-19 threat in a similar way as they did to previous pandemics and infectious disease outbreaks (e.g., SARS, MERS, Ebola Virus).  Clearly, since coronavirus is a known entity, it’s on the list of exclusions.  On a broader scale, we’re continuing to see the markets tighten up overall, especially given the uncertainty and stress on the global financial system, and the cumulative claims impact on carriers still a huge question mark.

Now, and in the future once COVID-19 has calmed down, we’d recommend looking into a policy as soon as possible once you’re planning an event for two key reasons:

  • It’s still early, but the marketplace will most likely become more restrictive from a terms, conditions and pricing standpoint.  Getting an idea of what an option would look like for your event will help with the planning process and budgeting.
  • This is a good reminder of the benefit of placing a policy for your event as soon as possible, which can protect you from known issues not being able to be included on your policy, such as COVID-19.  In addition, it may also prevent having to pay higher rates after a large-scale event.

Major Events are Being Canceled Across the U.S.

With the massive impact of the coronavirus becoming more evident by the day, the headlines are filled with high-profile business, sports and entertainment events being postponed, canceled or impacted in some fashion.  Some of the more notable impacts have been the cancellation of the NCAA Basketball Tournament, the NBA season, The Masters Golf Tournament, and MLB Baseball already pushing back their start date a few weeks (for now).  Not to mention the hundreds of smaller everyday concerts, festivals, conferences, and events of all shapes and sizes that don’t make the news.

Just a few examples of major events recently canceled or postponed:

  • Ultra Music Festival 2020, which was scheduled for March 20-22 at Bayfront Park in Miami.  Roughly 170,000 people were set to attend, with an estimated near $1 billion in overall economic impact.
  • South by Southwest (SXSW), the annual festival that draws over 100,000 music, tech and pop culture fans to Austin, Texas, has been canceled in response to the coronavirus threat.  The economic impact of the 2019 festival has been estimated at over $350 million.
  • Coachella Valley Music & Arts festival—originally scheduled for mid-April—will be postponed due to concerns surrounding the COVID-19 outbreak and moved to October, over the weekends of 10/9 and 10/16.  The financial impact of the festival is massive, with close to $1 billion resulting from the combined four Valley festivals.

There’s even talk of the looming potential impact to the upcoming 2020 Olympic Games in Tokyo, with discussion of athletes competing for the gold in empty stadiums with no spectators.  It goes without saying that the current and long-term economic fallout is difficult to conceptualize.

Promoters are Hedging Their Bets

With spring and summer around the corner, a tidal wave of major event cancellations as a result of state or federal government decree (which could fulfill force majeure and trigger coverage) would result in enormous claims payouts by insurance firms.

While an ever-growing list of events have been canceled well in advance, many event holders are hedging to see how governments react in the coming days and weeks.  Many state and local governments are now restricting the size of any gathering to limit public exposure and spread of the coronavirus.  For example, Washington Governor Jay Inslee announced on March 11 that any gatherings of more than 250 people would be prohibited in three counties impacted by COVID-19.  California Governor Gavin Newsome has followed suit, calling for all gatherings over 250 to be canceled.

Overall, there’s been a hesitation for event promoters and officials to cancel in advance and take a “wait and see” stance, in large part because unless an additional coverage rider has been purchased, nearly all event insurance policies do not cover pandemics or infectious disease outbreaks.  In the end, it is more financially advantageous for events to be shut down by state or local government than for event holders to make the decision themselves.

We’re Here to Help

For questions about Event Cancellation Insurance or Special Event Coverage, or about insuring an upcoming event, please contact Kathryn Ryan at kryan@aliverisk.com or Patrick Gavin at pgavin@aliverisk.com.

As your clients plan for the best, let Alive Risk, a division of All Risks, Ltd., protect them from the worst.  Alive Risk understands the need for Special Events Insurance and our underwriting evolves with each event that requires individual attention.  Contact us today to learn more about our Special Events Insurance Program!

Legal Disclaimer: Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.