COVERAGE HUB: Mona Grabowski, vice president, entertainment specialty practice with Hub International insurance brokerage. (Courtesy vendor)
Accessing higher limits has proved challenging
As overhead costs to put on a music festival have risen, so too have insurance rates for large-scale events as organizers offer audiences increasingly immersive experiences, says one expert who brokers coverage for large-scale events.
Weather will always be a top risk, but festivals have become more experiential, creating greater loss exposure, said Mona Grabowski, vice president, entertainment specialty practice with Hub International insurance brokerage.
“I’ve seen it over the last five years. Festivals want another way to bring consumers in, so they’ve created more of a tactile or immersive experience. They’re wanting to bring in and facilitate events that attendees can participate in, whether it be things a rock wall or a 5K (run) that they’re going to do over a two-day period during the event, or something where participants are actually physically involved,” Grabowski said. “That’s brought in a whole set of underwriting criteria and exposures that we now have to take into consideration that drives the cost up. So, you have a higher exposure and liability because you have activations for participants. Where there’s additional injury exposure, you need higher limits to accommodate that, and I think that has played a big role. I think (the events are) exciting. I understand why they’re doing it.”
The cost to put on a festival had already spiked by about 30% pre-COVID, “but they weren’t passing that cost back onto the consumer,” Grabowski said of festival promoters.
“So, ticket sales remained the same, but there was an increase in overhead, as well as insurance costs,” she said. “The liability, in particular, the excess coverage, had a huge spike. Markets were pulling out, or if they had offered $10 million in coverage, they might offer $5 million.”
Accessing higher limits typically seen for large festivals has proven challenging, but there may be some relief in sight, according to Grabowski.
“The outlook for 2025 is much more positive in terms of what the rates are going to do for insurance on the liability side,” she said. “On the excess side, I think we’ll still see a slight influx, but I think it’s stabilized in terms of the markets that are willing to put up the limits, and those that have previously pulled out altogether are starting to increase slightly on what they’re willing to offer.”
Increased insurance rates are the bane of homeowners, but when it comes to festivals and large-scale events, the factors driving rates are different.
“It’s such a niche market, and the carriers that are willing to write specifically live events and festivals really have an understanding of their sector. So, it’s not hit as broadly as (other) marketplaces out there, in general liability, or in property rate increases or liability. It has to do specifically with the entertainment industry as a whole. So, when we suffer catastrophic losses within the entertainment industry, our markets are affected by that and it’s a rippling effect specifically to the industry.”
Just as adverse weather and catastrophic losses from fires or floods directly impact property insurance rates, when trouble comes to festivals, the result is similar, especially when cancelation results.
Notably, Hub had convinced Allen Sanford, partner and producer of the three-day BeachLife Festival in Redondo Beach, California, to consolidate its brokers to best manage risk, as the event’s prior risk strategy left gaps, according to Grabowski.
According to the brokerage, BeachLife “was in a precarious position, with huge financial and reputational consequences in case of a claim.”
With HUB, the event “developed vendor policies and procedures, adjusted security company coverage to meet underwriter demands and provided expertise for the general contractor to reduce risk on a multi-million-dollar project,” according to a Hub case study. “Having a single partner in HUB that understood the breadth of its needs” helped insulate the organizers from vendor liabilities and “prepare for the unexpected through examining worst-case scenarios.”
Although BeachLife takes place in May in a locale known for moderate weather, the event was cut short on its third and final night, May 5, when wind gusts up to 50 miles per hour made for unsafe conditions.
When ZZ Top’s set was cut a few songs short around 5 p.m., the 10,000 attendees were instructed to evacuate before learning the event would not resume. Fans hoping to see Trey Anastasio, My Morning Jacket and Fleet Foxes that night were further disappointed when the winds later died down, making for a beautiful Los Angeles evening.
BeachLife offered refunds, which were covered, Grabowski said, and the event is on track to return in 2025.
On the subject of festivals becoming more experiential, Grabowski said, special consideration is required, for instance, when bringing in cannabis to events.
“There’s been a real push in a lot of events I’ve seen, especially in California, where cannabis is a big focal point in terms of live events, and I think that festivals want to provide a way for concert goers to enjoy their cannabis at their festivals. And how do we do that? Right? We have to underwrite it in a whole different way, another set of exposures that we have to compensate for, and there’s a whole set of and slew of additional expenses that go along with that.”
Organizers have been creating a separate area from the festival itself for cannabis.
“It has to be age appropriate. It can’t be visible to the public. There’s a lot of underwriting criteria that goes into having a festival with a cannabis exposure, but it’s definitely on trend,” Grabowski said, adding that it’s new territory in a lot of ways. “It still makes a lot of carriers uncomfortable because it’s not federally regulated at this point. So, know your state and local jurisdictional laws when you’re setting up an event, going into it, be well aware and understanding the permit process. You cannot carry a liquor license and pull a cannabis license. You have to have it separate. A lot of our festivals bring in an event producer that’s licensed in cannabis and can pull an event license as a cannabis event producer. They partner with an experienced event producer that’s well- versed in the cannabis laws and regulations in the area.”
The apparent intensification of storms is another factor driving event insurance rates.
In the niche marketplace of large-scale event insurance, the underwriting criteria of what a market is willing to accept is what sets them apart, Grabowski said.
There are insurers that will not entertain a festival that has a cannabis exposure, and there are those that will, for instance.
“The markets differentiate themselves by being a little bit broader in terms of what they’re willing to underwrite,” Grabowski said. “It allows for them to write larger, more advanced risks and that sets them apart in that way.”
(Editors note: This story has been updated)
