Some of the most challenging risks in the event cancellation business are aging performers—whether they're rock-and-roll stars or operatic tenors, according to one managing general agent who specializes in placing contingency insurance for concerts.
While the average person might think an opera singer would be more dependable and less risky, Jack Cave, president of Los Angeles-based Entertainment Brokers International, a unit of OneBeacon Insurance, said an opera star with an extensive travel schedule can be a difficult to place when it comes to non-appearance insurance coverage.
In addition, he noted that being an operatic singer puts a lot of strain on the vocal chords.
As artists get older, it becomes more difficult for them to perform, he said, noting that underwriters writing non-appearance policies typically ask questions surrounding the health of the artists, their track records for showing up at concerts, and how they will travel to the city and the venue where they'll be performing.
Chris Rackliffe, contingency underwriter for London-based Beazley, said similar considerations come into play when pricing policies. Insurers supplement information about the track record of a performer with statistics, such as actuarially derived life and health rates for non-appearance policies and weather statistics for cancellation policies on outdoor events.
Pricing typically involves benchmarking against other similar types of risks, he added. "A tennis event or a U.S. baseball series are going to be different risks than an indoor trade show, and the rates will be reflective," he said.
For event liability policies, underwriters focus on crowd control measures and crowd characteristics in deciding whether to write an event, market participants said.
Asked about mosh pits, for example, Morris Nelson, a director for R.B. Jones in Denver, said that "if we know about it, we probably won't write it" at any price, adding that insurers view their existence as a "made-to-order" claims scenario.
Underwriters will ask, "How big is the crowd? What kind of crowd is the performer attracting?" he reported. "That's really the key. Rarely do the artists themselves cause a problem. It's the type of crowd they bring in. You'll get a different type of fan base at a Golden Oldies concert than a professional wrestling" match, where the crowd tends to be more interactive, he explained.
An America First rally was among the risks recently presented to R.B. Jones, although the submission came in too late to be considered, Mr. Nelson said, suggesting that it would have otherwise been vetted for possible placement. "If we feel it's going to be a group where they're not setting a stage for confrontation with other people, we'd probably look at it. If it looks like two groups [will be] going at each other, we probably don't want it," he said.
At Markel in Glen Allen, Va., Managing Director David Weisenberger described a generalist approach to underwriting special event business. Markel will write liability for everything from a low-hazard wedding reception at a certain venue, to challenging pony rides or firearms demonstrations.
"We're a very open market," he said, highlighting the "willingness to listen" and apply an individual risk underwriting approach as the company's market advantage. "So much special event business is now done over the Internet or without people involved that know much more than the guidelines in front of them."
Describing the pricing of event liability policies, Mr. Nelson said insurers have two or three ways of charging for special events–based on the number of days and limits, or more often, the number of people attending.
Mr. Weisenberger said Markel uses the latter approach, charging rates per attendee or per thousand attendees, with different rates for different hazard tiers.
Hazard considerations include questions about crowd control. Who is providing it–volunteers, an outside security contractor, local police or off-duty officers? Different providers moderately affect how pricing is structured, he said.
Insurers also worry about parking for large events. "If people are actually taking buses from off-site parking to the event, that's another hazard to consider," he said.
"As a surplus lines company, we definitely exercise our right to adjust rates based on the size of an event and experience in the past," he added, noting that rates could fall in a range extending anywhere from a nickel per attendee to 40 cents.
Both Mr. Weisenberger and Mr. Nelson said pricing is subject to soft and hard cycles. "Where you really see it is in minimum premiums, Mr. Weisenberger noted. "Rates are fairly constant, but minimum premiums go down."
Mr. Nelson, who writes event liability on behalf of HCC Specialty Underwriters and other carriers, agreed that a lot of liability business is based on minimum pricing, and that special events insurance is a segment where buyers are price-sensitive, although less so than in some other areas.
As for competition from new players, he said he doesn't see others jumping in.
"I just see some of the pricing getting soft," he said. "From a base price, I've seen it as low as $250 per event. That's getting fairly cheap," he said.
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