The cancellation of major tour events, like concerts, poses significant financial risks for insurance and reinsurance industries. This impact is especially evident with high-profile artists such as Taylor Swift. Her Vienna concerts were canceled this week following a planned attack at the Ernst Happel Stadium.
The cancellations, which affected around 195K fans, led to millions of dollars in claims against insurers, with the losses being distributed among several insurers. Swift’s Eras tour is estimated to generate nearly $2 bin in ticket sales.
Barracuda Music, the concert organiser, said all tickets would be refunded within 10 days. It could not immediately be reached for comment about insurance arrangements, according to Reuters.
High-Profile Cancellations: Insurance Case of Taylor Swift
Swift is popular among insurers because she rarely cancels concerts. Her prominence and success mean that most specialist event cancellation insurers in London are likely involved in covering her tour, another source mentioned.
The cancellation of major events not only affects insurers but also has a ripple effect across the music industry and related sectors. Promoters, ticket agents, and venues experience significant revenue losses, as seen in previous instances like Kanye West’s tour cancellations.
The financial stakes are high, with concerts generating substantial income; for example, Bruce Springsteen’s tour brought in over $171 mn in ticket sales within six months.
The insurance landscape for music tours, such as Taylor Swift’s Eras Tour, highlights the intricate risk management strategies involved in large-scale events.
Complex Risk Management in Modern Tours
Tours generally need three main types of insurance: equipment insurance for damage or theft, public liability insurance for incidents like audience injuries, and non-appearance insurance for covering costs if key performers cannot appear due to unavoidable circumstances.
Given the scale of modern tours, insurers expect that at least one in every 100 shows might be canceled. This expectation shapes policy structures, often including deductibles to avoid payouts for a small number of cancellations.
Financial Stakes are Immense
Stadium shows can generate millions not just from ticket sales but also from merchandise, which often exceeds ticket revenue.
Tour insurance policies are typically arranged early in the planning stages and are highly specific, considering the health and history of the performers.
Acts with a history of cancellations face higher premiums, and sometimes medical records or examinations are required. The use of pyrotechnics or aerial stunts also impacts underwriting risks.
Interestingly, while age might increase perceived risk, it can also indicate experience and reliability, making older acts more attractive to insurers.
Event cancellation insurance
Organizers of large sporting and entertainment events typically purchase event cancellation insurance, much of which is insured through the Lloyd’s of London market by a consortium of insurers.
A Lloyd’s confirmed that event cancellation insurance is offered at Lloyd’s, but said it could not comment on specific policies.
The standalone terrorism cancellation insurance policy would have been triggered by the terrorism act or threat clause within the policy, as there has been a known potential terrorism event.
Event cancellation insurance is designed to cover financial losses incurred when an event is cancelled due to various reasons, including non-appearance, damage to the venue, bad weather, strikes, or other causes.
What is event insurance?
Event insurance is a collection of cover types built into a specialist policy designed to safeguard the event or multi-event series you’ve organised against a range of risks.
Cover for an event can bring together a selection of products suited to the specific needs of the events market. Insurance policies can be built to the individual requirements of each event organiser.
Cover for kit can help with repairs or replacements, while public liability insurance assists with legal costs, expenses and resulting compensation. No matter the situation – whether it’s a deviation from the pre-planned programme or an injury at your event – insurance offers the cover to put your mind at rest, so you can focus on planning your event.
Do I need event insurance?
Even if the venue and suppliers have insurance coverage, relying solely on their policies can be risky and expensive. Organizers might still face claims as the event organizer. Without proper insurance coverage, they could end up paying defense and settlement costs out of pocket.
Due to the multifaceted nature of events, there are numerous associated risks. Flooding could prevent you reaching the event with crucial equipment which could cause postponement, relocation or abandonment.
Alternatively, an accident could result in a guest filing a liability claim, or you might need to fund expensive tech kit replacements after irreparable water damage.
Insurers Faced a Substantial Claims
In the case of Taylor Swift’s cancelled concerts, insurers faced a substantial claims bill as the event was scrapped due to a confirmed terrorist threat. Such high-profile cancellations can lead to significant payouts, although they are often shared among multiple insurers to mitigate individual losses.
The insurance market for event cancellations is complex and involves various stakeholders, including promoters, artists, and venues, all of whom may have their own insurance policies to cover potential losses.
The cost of these policies varies based on factors like the artist’s age, health, loss history, and the tour schedule, including whether the venues are indoor or outdoor.
The cancellation of concerts affects a wide range of personnel involved in the event, from the artist’s management team and band members to venue staff and vendors.
The music industry, increasingly reliant on live performances as a major revenue stream due to declining physical media sales, remains particularly vulnerable to such disruptions.
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