More than a month on from the Government launch of its £800m Live Events Reinsurance Scheme, Access explores what impact it is having on the live events sector and whether it is providing organisers with the confidence the initiative’s instigators intended.

Better late than never, the UK Government launched the Live Events Reinsurance Scheme on 22 September. The £800m scheme offers cost indemnification if an event has to be cancelled, postponed, relocated or abandoned due to new UK Civil Authority restrictions in response to Covid-19.

The announcement in August that the scheme was forthcoming followed more than a year of lobbying from the live events industry, but it was met with a somewhat tepid reaction from many in the industry. Tourlife MD Harry Parslow summed up the feelings of many when he said it was “too little, too late”.

The main gripe from the industry has been that, while the scheme covers cancellations due to Covid-19 lockdowns, it does little to mitigate the risk of events being cancelled due to mandatory capacity caps, headline artists cancelling due to Covid-19 or the re-introduction of social distancing.

While some event professionals have publicly aired their frustrations about the perceived shortcomings of the scheme, others have told Access, off the record, that they have not been able to obtain quotes from brokers and full policy details are unavailable.

The Reinsurance Scheme was created by Treasury in partnership with the Department for Culture, Music and Sport (DCMS), after DCMS had been under considerable pressure to help an events industry that was unable to plan ahead due to a lack of cancelation insurance on the commercial market.

DCMS says the aim of the Live Events Reinsurance Scheme is to give event organisers the confidence to plan through to September 2022. To enact the scheme the Government is working with Lloyd’s Market insurers including Arch, Beazley, Dale, Hiscox and Munich Re.

Lloyd’s Market Association CEO Sheila Cameron says, “The Lloyd’s Market Association, together with its insurer members, have worked collaboratively with HM Government to ensure the live events sector has the confidence to re-open and create value for our economy.”

Though the lofty words from the Government and its associates imply that the scheme is an all-encompassing support mechanism against Covid-related event cancellations, it does not appear to protect the industry against the impact of the Government’s wider plans around a rising Covid-case scenario.

Association of Independent Festivals (AIF) CEO Paul Reed says, “We’ve looked at the Government’s Winter Plan [Plan B] and it looks like it will be enacting social distancing or other such restrictions prior to a total lockdown in the event of a public health crisis. So ironically it looks like it has released insurance for the one thing it is not likely to do, which is go into lockdown without warning.”

“Ironically it looks like [the government] has released insurance for the one thing it is not likely to do, which is go into lockdown without warning.”

The Plan B that Reed refers to is the contingency the Government has put in place should Covid cases rise and hospital cases increase in the winter months. The plan details, among other things, how the Government would introduce vaccine passports, mask mandates and other measures in favour of another national lockdown. This certainly lends credence to the claim that the reinsurance scheme, at the very least during this winter period, could fall short of the mark.

Missing the mark

More than a month after the reinsurance scheme was opened, Reed says he has seen no evidence it has started to support the sector: “I haven’t spoken to any of our members who have managed to get a quote as of yet. The big problem with the scheme is that there was all this fanfare about it being released and yet it’s not really out there in the wild yet, so it’s difficult to judge how well it will work yet.”

Reed’s concerns are not limited to the policy details but also the cost. He says, “If we look at potential uptake, we recently surveyed our members and just 5% of respondents said they would most likely be taking out the reinsurance. I think this is a mix of the scheme’s limited use, but also the extraordinary cost, a 5% excess on an event, when the average festival costs upwards of £6 million, is difficult to manage when you consider how fine the margins are for festivals already.”

The survey asked AIF members the following question: How likely are you to pursue quotes for the recently announced government Live Events Reinsurance Scheme for your next festival?

In response, some 5% said they were very likely, 21% said “likely”, 58% said “not likely” and 16% said “unsure”.

Not exactly the most inspiring numbers, with only 26% of respondents leaning on the positive side of the scale. This reticence was echoed by veteran music industry insurance specialist Martin Goebbels, who is business development specialist at Miller Insurance Services.

He said, “I haven’t spoken to anyone yet who sees themselves as buying the cover for live shows whether that be promoters or artists. It will be interesting to see the reaction from festivals organisers in 2022 when they are ready to buy their insurance.

“It might be of more interest to sectors such as conference or exhibition organisers, whose main concern is a total lockdown rather than reduced capacity or the inability of an individual to appear.”

So perhaps the scheme misses the mark as well as falling some way short of it.  Goebbels says, “It is hard to see the UK Government scheme will have a positive impact on live music if promoters, artists and others involved in the financial chain of a live event feel the Covid cover is not viable.”

Independent insurance broker Tysers worked closely with the events and live music industry in campaigning for a Government-backed insurance scheme.

Tysers director Tim Thornhill says the scheme is a step in the right direction: “While there are still some gaps that are uninsurable, the fact that there is now some cover available should create some confidence in the market and benefit the supply chain.

“From our clients’ perspective there is a lot of information needed to get a quote, but knowing how much the Government needs for reinsurance like this, much of this is understandable. We’re seeing that we have some clients where this scheme is not something they would buy into, but on the other hand there are some where this is absolutely appropriate.

“I think this product has been created with quite a broad brush, so for something like a festival it may work better than at a tour for example, due to the lack of non-performance insurance included in the scheme.”

“I don’t think anyone can really blame insurers for not being willing to ensure a peril that has, and continues to have, such a devastating effect on the world.”

Private eye

With the Government scheme having limited usefulness, can promoters expect help from the private sector any time soon?

“I don’t think any insurer is going to offer anything to compete with the Government’s scheme. Give it a year or two and once we have returned to normality, maybe it could happen,” says Luker Rowe director Peter Tilsed.

He says that the Government’s scheme has a historic precedence: “The interesting thing is that if you want to use the Government scheme you get your normal insurance from a regular insurer, they go to the Government to sort the Covid cover. It is similar to the way terrorism insurance worked in the 1990s with the IRA attacks. Even today, many insurers don’t offer terrorism cover and the client instead has to go to a specialist.”

Terrorism reinsurance is still offered by the Government in association with Pool Re, nearly 30 years after the original scheme was enacted in 1993. Covid reinsurance could follow a similar path, depending on the longevity of the virus, as it remains an unattractive prospect for commercial insurers to cover.

Goebbels says, “We have consistently worked with the insurance markets to find a solution to offering Covid cover but, probably understandably, no insurer will consider it now or likely for some time to come. Until that time the live industry is reliant on the Government and to date this is the only scheme they are willing to provide.

“I don’t think anyone can really blame insurers for not being willing to ensure a peril that has, and continues to have, such a devastating effect on the world.”

While the chancellor of the exchequer, Rishi Sunak, has said that the scheme is “helping events providers and businesses plan with confidence right through to next year,” many in the events industry believe that the scheme does not addressing the key issues or inspire the confidence it was intended to.

So far the Events Reinsurance Scheme appears to have failed to gain traction but as festivals begin to attain reinsurance quotes a clearer picture of how the scheme will work in practice will develop. For the time being through, it appears to offer a safety net with some worryingly large holes in it.

Live Events Reinsurance Scheme key features:

  • It will cover live events that are open to the general public and are physically located in the UK. This includes live music events, festivals, sports events, trade shows and business events. Private events such as weddings and parties would not be covered.
  • In order to be eligible, event organisers must purchase the relevant cover from participating insurers within the scheme. Event organisers must also have or purchase a standard events cancellation policy (or a policy which includes event cancellation coverage) provided at least in part by a participating insurer – the cover backed by the scheme will not be offered on a standalone basis.
  • Premium is set at 5% of the total value of insured costs (plus Insurance Premium Tax).
  • Claims will be subject to an excess of 5% of the value of the insured costs or £1,000 (whichever is higher) per policy.
  • Event organisers can purchase cover up to the full cost of their event, irrespective of when those costs are incurred.
  • Cover must be purchased at least eight weeks prior to the event taking place. This requirement will however not apply for the first 12 weeks of the scheme.
  • The government’s expectation is that participating insurers will pay no brokerage in connection with the scheme and no deductions for such brokerage will be made to any premiums paid by insurers to DCMS in connection with the scheme.
  • The Scheme will run to 30 September 2022 with a review point in Spring 2022. Cover will be available to purchase through participating insurers which include Arch, Beazley, Dale, Hiscox and Munich Re (more are expected to follow). Event organisers can now start approaching these insurers to discuss their cover.

This article was published in the November edition of Access All Areas. Read it here, and/or subscribe for free here.