Taylor Swift: Cancellations Deal Blow to Insurers
The cancellation of major tour events, such as concerts, has significant financial implications for insurers and reinsurers. This impact is particularly evident in the case of high-profile artists like Taylor Swift, whose recent concert cancellations in Vienna due to a security threat illustrate the financial strain on insurers. The cancellations, which affected around 195,000 fans, led to millions of dollars in claims against insurers, with the losses being distributed among several providers.
The insurance landscape for music tours, such as Taylor Swift's Eras Tour, highlights the intricate risk management strategies involved in large-scale events. Tours generally require three main types of insurance: equipment insurance to cover damage or theft, public liability insurance to protect against incidents like audience injuries, and non-appearance insurance to cover costs if key performers cannot appear due to unavoidable circumstances.
Given the scale of modern tours, insurers anticipate that at least one in every 100 shows might be cancelled. This anticipation shapes the structuring of policies, often including deductibles that prevent payouts for a small number of cancellations. The financial stakes are immense, as stadium shows can generate millions not only from ticket sales but also from merchandise, which often surpasses ticket revenue.
Insurance policies for tours are typically arranged early in the planning stages and are highly specific, taking into account the health and history of the performers. Acts with a history of cancellations face higher premiums, and in some cases, medical records or examinations are required. The use of pyrotechnics or aerial stunts also affects underwriting risks.
Interestingly, while age might increase perceived risk, it can also indicate experience and reliability, making older acts more attractive to insurers.
"The standalone terrorism cancellation insurance policy would have been triggered by the terrorism act or threat clause within the policy, as there has been a known potential terrorism event," says Tim Thornhill, managing director at broker Tysers, speaking to Reuters.
Impact on Insurers
Event cancellation insurance is designed to cover financial losses incurred when an event is cancelled due to various reasons, including non-appearance, damage to the venue, bad weather, strikes, or other causes. In the case of Taylor Swift's cancelled concerts, insurers faced a substantial claims bill as the event was scrapped due to a confirmed terrorist threat. Such high-profile cancellations can lead to significant payouts, although they are often shared among multiple insurers to mitigate individual losses.
The insurance market for event cancellations is complex and involves various stakeholders, including promoters, artists, and venues, all of whom may have their own insurance policies to cover potential losses. The cost of these policies can vary based on factors such as the artist's age, health, loss history, and the tour schedule, including whether the venues are indoor or outdoor.
"The standalone terrorism cancellation insurance policy would have been triggered by the terrorism act or threat clause within the policy, as there has been a known potential terrorism event," said Tim Thornhill, managing director at broker Tysers.
Broader Industry Effects
The cancellation of major events not only affects insurers but also has a ripple effect across the music industry and related sectors. Promoters, ticket agents, and venues experience significant revenue losses, as seen in previous instances like Kanye West's tour cancellations. The financial stakes are high, with concerts generating substantial income; for example, Bruce Springsteen's tour brought in over US$171m in ticket sales within six months.
Moreover, the cancellation of concerts impacts a wide array of personnel involved in the event, from the artist's management team and band members to venue staff and vendors. The music industry, which has increasingly relied on live performances as a major revenue stream due to declining physical media sales, is particularly vulnerable to such disruptions.
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