In 2010 the festival market and the corresponding demand for festival insurance, both in the UK and internationally, was buoyant. New festivals were being launched, demand for tickets was high and among underwriters there was a perception that they were highly resilient to cancellation. Fast forward to 2017 and we, along with a number of our peers in the market, have decided to stop providing coverage for festivals, at least until something gives. The rationale for this will already be clear to many in the contingency sector.
Festivals, which sometimes include dozens of acts, can’t often be rescheduled in the event of inclement weather unlike concerts or other live performances. Extremely large festivals such as Glastonbury can withstand severe weather better than others. They are of a scale which allows them to close off entire sections and still go ahead. But this is not the case for smaller festivals, many of which are struggling with falling demand and becoming more exposed to cancellation as weather patterns become less predictable.
Despite a series of cancellations which should have disavowed the idea that the show must go on, rates remain at levels which even in 2010 would have been inconceivable to all but the most secure events, such as indoor exhibitions. And remarkably, despite the losses, the levels of available capacity have hardly diminished. This is unsustainable.
Threats to festivals are not isolated to the increasingly unpredictable weather. Terrorism is now a very real threat to high profile events which often lack the security procedures of more permanent crowded places. The demographics of festival attendees also plays a part. The festival-going market is getting older. A generation which grew up with festivals has continued to attend them regularly en masse and the acts, which they grew up with and invariably have gotten older themselves, are the main draw for this audience. Older artists committing themselves to often gruelling schedules also present an increased risk of exhaustion and cancellation. This is not being accurately reflected in pricing.
In our view, if the festival insurance market is to return to profitability, then intervention will have to come in the form of significantly increased pricing and, particularly for smaller events, improved risk mitigation processes. Insurers have already tried to manage threats such as drug use and bad weather. Managing drug use at festivals from a zero tolerance approach to medical personnel and quiet, controlled areas have helped but also created their own problems. Using weather radar to monitor incoming storms has made events safer for the public to attend but made festivals far more likely to cancel based on weather that ‘might’ threaten the event.. Similarly ensuring that festivals allocate a portion of their budget to contingency plans, which serves as a deductible, has protected insurers from some of the costs associated with bad weather. Failure of festival organisers to better implement proven risk mitigation procedures and of insurers to charge a genuinely risk-reflective price will lead to further losses and more insurers with loss-making books of festival insurance business will decide that enough is enough.