By Simon Fisher, Executive Vice President – Gulf – ACE Gallagher
The Middle East has established a reputation as being an ideal host for major international events. The UAE government’s recovery response to Covid-19 has set a new benchmark in hosting live events post-pandemic. While the rest of the world was still getting back to normal, Dubai’s Expo 2020 stood as a great example of a post-pandemic event. Since then, we are now seeing an influx of businesses and visitors to the region thanks to easy access and new visa regulations.
The wider GCC is a magnet for major events. While Abu Dhabi has consistently been ranked as the world’s top sports tourism destination at the World Travel Awards (WTA), owing to events such as the Formula 1 Etihad Airways Abu Dhabi Grand Prix, the Ultimate Fighting Championship (UFC), concerts by global artists and several other cultural events. Bahrain has also been on the Formula 1 calendar since 2004.
Saudi Arabia, meanwhile, anticipates tourism and will account for a sizeable 10 percent of its annual GDP in the next 10 years as part of its Vision 2030. We are now seeing a raft of sports and entertainment events in the Kingdom in line with the strategic and diversification goals, such as hosting large-scale events, including Formula E, World Heavyweight boxing, international tennis competitions, Formula 1, and WWE.
Furthermore, Qatar has invested at least $200 billion in infrastructural projects, including eight new stadiums for the FIFA World Cup 2022.
There is no doubt hosting events of such scale carry immense prestige. However, there is also a huge element of risk that must be assessed and insured against so many factors beyond the organisers’ control. For instance, canceling events at any stage can have severe financial and reputational implications, while being forced to postpone events at the last minute is a financial and logistical nightmare.
One thing the pandemic has taught us is that things can change rapidly. The industry suffered lost revenues of up to $30 billion in 2020 as a result of the pandemic-enforced cancellations, according to Pollstar, which provides up-to-date, relevant data for the global entertainment events sector. Events that we were able to go ahead with during such times were subject to limited crowds and, ultimately, reduced revenues.
Additionally, communicable diseases are now a standard exclusion with governments supporting event organisers. In 2021, the UK government announced that it is collaborating with insurers for the ‘Live Events Reinsurance Scheme’ to provide a cost indemnification insurance programme that will provide coverage against the cancellation, postponement, relocation, or abandonment of events due to the limitations imposed in response to the COVID-19.
Furthermore, the Saudi Arabian Monetary Authority (SAMA) approved a number of insurance products to cover risks associated with cancellation of live events in the Saudi insurance market in coordination with the General Entertainment Authority (GEA).
Event cancellation rules are often complicated involving large values and involve bespoke language. As is always the case with insurance coverage, the precise nature and scope of agreed coverage, as well as the specific policy language and consideration for the unique circumstances giving rise to a potential claim in any given situation, will determine whether coverage is available. This is where a knowledgeable broker comes to the fore to decipher supplier contracts, recognise risks, and offer the level of protection required to cover exposure.
Several parties have insurable interests in these kinds of events, which is a crucial factor while developing a policy. Therefore, it is essential to distinguish between those who will pay the insurance premiums and those accountable for calling off the event.
For a large-scale event like the FIFA World Cup, for example, local insurance providers will not typically cover events where millions of dollars are on the line. This highlights the necessity for international insurance providers in such circumstances. According to a report by Abu Dhabi National Insurance Company, the total cost of event cancellation insurance can be extremely high; it often accounts for 1 percent to 1.5 percent of an event’s overall cost.
Qatar’s investment in the FIFA World Cup is on another level. Considering the millions of dollars spent on the construction of new stadiums, hotels, and infrastructure alone, based on the average cost for cancellation cover and insuring against such an eventuality is going to be high. Cancellation does not just affect the organisers as there are sponsors with investments in play, so the organisers must look for a unique policy intended for the sponsors to protect against losing money in the event of cancellation.
Increase in demand
The rise of insurance premiums is another intriguing factor when debating whether to incorporate event cancellation insurance. One cannot purchase plans in the post-pandemic insurance market for the same price they previously paid pre-COVID. According to industry reports, premiums for the same cancellation coverage have increased as compared to in the pre-pandemic era.
Another crucial aspect to consider while providing insurance is the impact of the geopolitical landscape. In other words, planning an event in Europe won’t be the same as planning a similar event in the Middle East, where there may be certain additional vulnerabilities.
That said, with the region’s status as a global destination for major events is now cemented, there are growing demands for complete insurance coverage for event cancellation, and several providers are actively mulling ideas on how to approach this problem and implement plans most effectively. The emphasis is on how to treat all parties equally from local organisers, and sponsors to international parties.
To conclude, it is essential to realise event cancellation insurance is crucial. Recent global happenings have shown that event insurance is more pressing than ever. Every event organiser, regardless of how big or small, must consider a number of potential risks. Event insurance is a vital security measure providing organisers peace of mind and frees them up to concentrate on what they do best: plan and organise events. Although the world has learned from 2020’s painful lessons, the hazards and risks still exist. Before embarking work on events, organisers must carefully examine the risks, and assess cancellation and liability cover, regardless of scale in terms of size or cost.
في مقابلة مع مجلة الأيام، تحدث سايمون فيشر عن كيفية تغلب شركات التأمين على الأزمة في العامين الماضيين، مقدماً نظرة مستقبلية إيجابية لقطاع التأمين
16 December, 2022