Divisional Director – Sport, Media and Entertainment – Howden UK GroupContact
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Newspaper headlines in the UK have included “Is the Killer Virus here?”, “World War Flu” and “China in Lockdown”. Much of the reporting implies an impending health disaster which is life-threatening to all. Such conditions have the potential to close events and other large gatherings resulting in a loss of revenue.
This discussion document looks at the potential risk and impact of this latest scare for event organisers and how event cancellation insurance may respond.
Event cancellation insurance can be purchased to cover an event organiser or right holder for their potential loss of revenue or costs should an event not proceed as planned for any cause beyond their control. A short list of perils are excluded as standard but can be added back for an additional cost. These have either been the subject of previous large losses or need to be individually understood and rated depending on the event. One such excluded peril is Communicable Disease.
This exclusion was added as standard as a reaction to the previous outbreaks of SARS and Swine Flu. Typically, immediately following an outbreak, cover becomes unavailable or costly. Once the situation has improved Insurers will start offering cover again. For events in certain territories, such as China, it can be difficult to get any cover due to the historical experience.
At the time of writing, Insurers have not yet imposed a general exclusion for the “Wuhan coronavirus” as they are waiting to see how the situation develops. We would however anticipate that in a relatively short time frame the additional rate charged for the cover will rise and cover may be withdrawn all together. It is highly unlikely that this cover will be offered to any event taking place in China.
For a number of years the scientific community have warned that we are overdue for a deadly pandemic.
At present the situation is nowhere near a pandemic status. The number of cases are rising daily but the mortality rate remains low compared to previous outbreaks, with deaths occurring amongst the already medically vulnerable. Fever along with symptoms that mirror pneumonia and other lower-respiratory diseases may all point to 2019-nCOV—but they may also just point to a flu. Given that it’s flu season, that makes infected people hard to spot. In many of the infected, the disease is minor and may be diagnosed. “While severe illness, including illness resulting in a number of deaths, has been reported in China, other patients have had milder illness and been discharged,” the CDC reports.
For now, WHO is only recommending basic precautions: frequent hand washing, avoiding live and dead animals in affected areas, and avoiding contact with people who show signs of acute respiratory infections. But further safety measures may be deemed necessary as our knowledge of the illness grows—and as it continues to spread.
At the time of writing, the public authorities in China have suspended public transport in 10 cities, shut temples over the Lunar New Year and have even closed the Forbidden City, the Bird’s Nest stadium and part of the Great Wall. Several events have been moved from Wuhan to other locations. This is all designed to prevent the spread of the disease and secondary centres of infection being established.
The result of these restrictions is that it is not possible to proceed with an event that is affected by these travel restrictions.
Should it become necessary to prevent a pandemic from developing or getting worse, other Governments or local authorities may issue similar restrictions which would cause affected events to be cancelled. Should the World Health Organisation issue an International travel advisory it would cause widespread disruption to sport and leisure events and large gatherings of people.
Providing that the communicable disease extension has been purchased without any restriction for SARS or related diseases, We would expect that a cancellation policy would respond to any loss occurring as a result of such a cancellation as this is clearly beyond the control of the organisers.
Another factor that may affect events is the fear of travelling caused by the media coverage. In the face of such media coverage it is natural that anyone travelling Internationally to an event, particularly to an affected territory may hesitate. This can cause pressure on event organisers to cancel and may certainly affect their revenue depending on their ticket conditions. Such a cancellation is not covered by the insurance as it is not considered “necessary” and “beyond the control”, and fear of communicable disease remains excluded even if the extension has been purchased.
An event organiser may come under enormous pressure from their attendees under such circumstances. Good communication is absolutely vital and we are able to provide risk management advice to our customers to assist in these circumstances.
Event cancellation should always be purchased well in advance of your event t ensure the widest cover available and early purchase does not affect the price. This locks in the cover and ensures that when new circumstances arise, such as this new virus, your potential loss is covered. Where cover has not been purchased and new circumstances arise it can become difficult or more expensive to obtain the cover.