The world of insurance may seem stuffy and dry, but hardly a significant news story passes without leaving a wake of ripples in the insurance industry, some of which are felt long after the news item is off the front pages. Example: the death of Michael Jackson.
The O2 is a 20,000 seat concert facility in London, and initially the word on the street was that AEG Live was scheduling 10 concerts this summer with the King of Pop. Music events of this magnitude typically require large upfront costs (marketing & tickets, advance to the performer(s), crew costs) plus whatever else is needed to stage a show being billed as the most technologically advanced concert in pop music history.
To mitigate the potential for loss if the show is cancelled by the performer, or by other unforeseen fortuitous events, the promoter buys “event cancellation” insurance. This is a policy that pays a pre-agreed amount to the promoter, funding their ability to discharge contractual obligations and provide refunds to ticket-holders – but only if the show can’t go on.
The good news for AEG Live this past spring, was that it soon became obvious that consumer demand supported booking many more dates at The O2: finally 50 dates to accommodate 1 million fans. The bad news: AEG’s broker had difficulty obtaining event cancellation insurance for even the initial 10 shows. Underwriters just didn’t want to take the risk. So it appears that most of the shows were uninsured if any part of the schedule was cancelled. Now, admittedly much of this is “street rumour”; but the insurance industry is not that big, particularly when it comes to this kind of niche coverage, and you know what they say about bad news travelling fast.
The result: this summer’s 50 concert package is a “non-event” with the potential for staggering losses. But then, that’s why we buy insurance – to provide financial protection against the unforeseen – even when the unforeseen becomes front page news.