The impending nuptials of Prince William and Kate officially reached critical mass this week, with festivities set to kick off in London on Friday. Given the worldwide attention the engagement has garnered and the scope of festivities planned, there are many insurance implications involved with and surrounding the wedding.
While the couple may not be updating their homeowner's policy to include items such as the royal crown jewels (those are safely sequestered in the Tower of London and guarded by a horde of Beefeaters), there are nevertheless insurance issues to consider for the newlyweds and their millions of “guests” prior to the I do’s.
The most common coverage purchased for spectacles such as this is event cancellation or wedding insurance. Tom Phillipson, Swiss Re Corporate Solutions’ head of special risks, explains that his unit writes contingency covers, including event cancellation and non-appearance policies. His unit has supplied significant net capacity for such large risks as the World Cup, the Olympic Games, exhibitions, and of course weddings.
So what would a policy for the royal couple look like? Phillipson explains:
“We certainly have experience dealing with royal weddings at Swiss Re,” he says. “We have seen limits of €10 million to €20 million ($14.8 million to $29.6 million at current exchange rate) for smaller European events. Limits are driven by the cost of staging the event, which would be reimbursed to the organizer in the event of cancellation. Deductibles for a wedding of that size would be at least €250,000 (370,600).”
Those are big numbers, especially when figures for traditional weddings are analyzed.
“Compared to other events, it’s quite high,” says Phillipson. “Celebrity weddings—a footballer marries a pop star, for instance—would typically have limits around €5 million ($7.4 million). More typical weddings tend to have €30,000 to €50,000 ($44,470 to $74,117) in coverage, with €100,000 ($148,235) in cover reached if it’s quite a big event.”
What does the policy typically cover? Phillipson explains, while also noting standard exclusions:
“Any event beyond the control of the organizer or key participants would generally be covered, including natural catastrophe, terrorism, adverse weather, national mourning—particularly relevant to the royal family—and it would also include any inability to get to the venue, unless it’s excluded,” he says. “Typical exclusions include financial causes—for whatever reason the couple couldn’t pay for the event because of financial resources or causes—no attendance from lack of interest, which is extremely unlikely in the event for Friday, avian flu, war, and nuclear.”
What about a runaway bride scenario, or a groom with second thoughts?
“What would never be covered under a wedding policy is if one of the two parties got cold feet, because it wouldn’t be something outside the controls of the key participants.”
Underwriting the Risk
Phillipson notes that underwriting such a policy means taking into account several factors —most of which aren’t all that unique.
“We’d be looking to see, on a historic basis, how frequently events like this have been cancelled in the past,” he says. “Obviously it’s very difficult if you look at just royal weddings—it wouldn’t give you much of a loss history. But we have extremely detailed data on rock concerts and other events based on non-appearance which would come into play.
“We would also be looking at the geographic location to see if it’s exposed to natural catastrophe,” continues Phillipson. “In this case, we’d see that London is not an area prone to natural catastrophe. However, the city has been a target of politically motivated attacks over the years, so we would look at the likelihood of a terrorist attack and analyze security measures. For instance, how strong a ‘ring of steel’ would be that is placed around the processional route.”
Beyond Bride and Groom
The sheer scope of the event extends well beyond the royal couple, though. A whole economy has sprung up around the event, with many businesses expecting a windfall of economic activity.
“Anyone with a financial interest in the wedding would want to take out event cancellation cover,” says Phillipson. “That could include souvenir sellers, hotels, and television networks that sell advertising based on the event taking place.”
Insurance is also available to those who failed to receive a royal invitation and are instead hosting one of some 45,000 street parties in honor of Prince William and Kate. Zurich is one company offering such liability coverage, which is often mandated by local authorities.
Zurich’s public liability insurance costs £63.60 ($106) for a one-off event and provides cover for those organizing a street event for up to 200 participants; cover for anyone who is volunteering to help plan and run the street event; a £5 million ($8.3 million) limit of indemnity; and no excess.
The policy doesn’t cover injury or damage arising from alcohol or drugs; inflatables (i.e. bouncy castles), fireworks and bonfires; or damage to property belonging to the host or in either the host’s or any volunteer’s custody and control or held in trust by or borrowed, rented, leased or hired for use by the host.
What About Divorce?
Although divorce rates have been falling in recent years in England and Wales, according to the Office for National Statistics, there were still almost 114,000 splits in the country in 2009. Is the relatively new concept of divorce insurance something Prince William and Kate should explore? For those unfamiliar with divorce insurance, here is how it works:
“Divorce insurance is sold in units of coverage,” says John Logan, chairman and CEO of SafeGuard Guaranty Corp. “You can buy as much as you need or your budget will allow, from one unit up to 200 units per policy. Each unit is worth $1,250 worth of coverage, which means you could buy up to $250,000 in coverage. Each unit costs $15.99—it doesn’t matter if you are getting married for the first time or if you are Larry King.”
According to Logan, the value of the coverage goes up every year by $250 per unit after the four-year waiting period. So if someone bought a 10 unit policy, the premium cost each month would be $159.90. After four years, that 10 unit policy—which is initially worth coverage of $12,500 on the first day of claim eligibility—would grow each year by $2,500. After 20 years, the policy would be worth well over $60,000.
“With the royal couple, the likelihood that they would be wanting a high-priced policy would be pretty small,” admits Logan. “Even though we do allow up to four policies to be bought separately for individual coverage of up to $250,000 on day one of claim eligibility, odds are the royal couple has a prenuptial agreement in place.”
Logan says that although he doesn’t expect Prince William and Kate to ring his phone anytime soon; he notes that in the UK, the cost of divorce is very similar to the median income, making it very expensive to get divorced.
“While the royal couple may not get divorce insurance, we think we’ll see a lot of policies sold in the UK in the near future,” says Logan.
Here’s hoping the royal couple never has a need for it.