Every year floods, storms, bushfires and terrorist incidents claim lives, devastate businesses and destroy livelihoods. The recent pace of such events in 2016-2017 have brought home the need for contingency insurance for event promoters and organisers in Australia.

The recent terrorist attack in Manchester Arena at pop star Ariana Grande’s UK concert has resulted in the forced cancellation of several other upcoming major acts, including Radiohead. Events like these have reinforced the need for insurance among event organisers which gives rise to tremendous opportunity for brokers in Australia.

Katie O’Neill, Contingency Underwriter at Beazley Underwriting says, last surveyed, the sector is estimated to be worth around $10 million, “a large portion of which is placed directly into London rather than with local insurers”.

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However, she believes the potential market to be much larger as there are still many events in Australia that run without the safety net of cancellation insurance.

In addition, the event management industry in Australia is becoming increasingly professional and qualified, which has resulted in many more event organisers recognising that purchasing event cancellation insurance is essential for anyone who wants to be seen as a professional or a leader in their industry.

This means there are thousands of potential prize indemnity clients out there who may not even be aware that cover is available.

Emerging risks and trends

Nic Jobling, Contingency Underwriter from Beazley Underwriting, believes the key growth areas are in protecting clients from terrorism and increasingly unpredictable weather.

O’Neill says, “Terrorism unfortunately has been the most prevalent emerging risk. Thankfully, Australia has not experienced this first-hand too much, but in the UK and Europe the growth has been rapid.”

Like any other specialist field within the insurance industry, the best brokers will be those that specialise.

It’s worth noting though that while many global insurers exclude terrorism from coverage, the Terrorism Insurance Act 2003 in Australia overrides terrorism exclusion clauses in eligible insurance contracts and requires insurers to meet claims arising from a declared terrorist incident.

Terrorism aside, unpredictable weather driven by climate change is another area of growth for the contingency sector. Over the past few years, the number of events affected by unseasonably severe weather has increase dramatically. O’Neill observes, “This has forced even those event organisers and promoters who have traditionally just worn the cancellation risk themselves to rethink their position.”

Opportunities and challenges

O’Neill believes that as the market is still relatively immature, insurers and brokers have the chance to innovate as new challenges and risks arise.

One recent innovation is parametric insurance, where payment is made upon the occurrence of a triggering event, usually a low-frequency, high loss type.

Hubert Jumel, Chief Executive Officer – Australia, AXA Corporate Solutions, who designs bespoke covers to protect clients against weather risks, especially in sectors such as agriculture, tourism/ leisure, construction and food and beverage,says the market for this type of cover is growing in Australia.

Madeleine Latapie, Marketing & Development Manager, AXA Global Parametrics adds, “The opportunity here is to cover weather-sensitive clients in 75 per cent of businesses without the need for any complex or adversarial claims payment processes.”

Recent events have forced even those event organisers and promoters who have traditionally just worn the cancellation risk themselves to rethink their position.

She too thinks this is an absolute growth area for brokers. “As parametrics is a relatively new type of product, and as it is applicable in so many industries, insurance brokers can leverage the opportunity to present a different kind of insurance solution to their client. At AXA, we work closely with the broker and client to come up with the best solution.”

But it would be limited to those already with clients in the events and entertainment field. Jobling clarifies, “Brokers without existing leads in this area or without a background in events and entertainment will probably find it hard to break into the market. However, if a broker is passionate about these industries and believes that they can bring a fresh and innovative approach then I would encourage them to get in touch with underwriters to discuss opportunities.”

What skills do brokers need?

Brokers should consider a plethora of likely situations when placing a policy, whether the event is indoors or outdoors, spread over multiple days etc and brokers need to know the finer details of budgets and margins.

Simon Calabrese, Client Director, Entertainment & Leisure, Aon, advices that patience, the ability to listen, and hard work are paramount. “Like any other specialist field within the insurance industry, the best brokers will be those that specialise in their segment of choice. Working closely with industry groups and associations will provide a strong understanding of the industry’s needs.”

He stresses that skills development is important: “Furthering your insurance education via an accredited learning organisation, goes hand-in-hand with that journey.”

O’Neill explains, “Like any niche market, contingency is not necessarily difficult to understand, but it is highly specialised and there is a big difference between a broker who truly gets it versus one who is just having a go.”

That said, most of the big events appoint brokers from international firms to manage their array of insurance requirements. “The next step down from the mega international events is where most brokers have an opportunity to win business. At this level, your professional and personal connections are still key to getting the opportunity to look at the business and from there you really need to demonstrate that you understand the events and entertainment industry to avoid getting overlooked.”

Jobling says that it is probably the most interesting part of the insurance market even if it is not the most lucrative.

He adds, “If a general insurance broker is serious about becoming a contingency specialist than I would recommend that they learn as much about contingency products as possible first, preferably by working alongside someone who is already proficient.”

Brokers should have a well thought out business plan which identifies key target markets and clients, and how they plan to win clients. “If you’re only looking to place a few policies per year then you’re probably better offer utilising a wholesale broker who specialises in contingency as they will make the process much smoother and easier for you and will help ensure you get the right cover for your client.”