Cancellation insurance key for sports hospitalityOriginally published on Lloyds.com - 18 June 2014
Race-goers and tennis fans will be praying for good weather in the next few weeks as the British summer sporting calendar gets into full swing with Royal Ascot this week and Wimbledon on Monday.
Many people attending these events will be the guests of companies and corporate sponsors, an important source of revenue for many sports and one that organisers are increasingly looking to protect with insurance.
Hospitality in sport
Hospitality at sporting events has been recovering in recent years, since falling from its pre financial crisis level, according to Duncan Fraser, Head of JLT Sport. “There has been a steady increase in hospitality across all sports and is now close to 2008 levels again,” he says.
For some sports and events, corporate hospitality accounts for a high proportion of revenues, with cancellation exposures running into the tens of millions of pounds, according to Fraser.
Tennis, golf, horse racing and motor sport all attract a high degree of corporate hospitality. Major events in the summer sporting and social calendar include the racing at Royal Ascot, tennis at the Queen’s Club and Wimbledon, the Henley Royal Regatta in June, motorsport's British Grand Prix and the Open golf in July, he says.
Events with major television coverage, particularly global events such as the football World Cup and the Olympics, attract interest from corporate sponsors and large revenues, explained David Boyle, Class Underwriter at Sportscover Europe. “Sponsorship income from the Super Bowl, for example, is huge, as major corporate brands fight to be seen in front of television’s biggest audience of the year in the US,” he explains.
“Corporate hospitality is similar in that there is a greater attraction for major events but it is not so dependent upon television income and is more about the stature of the event. This can range from a box at the Ashes to club level seating at the FA Cup Final,” he says.
Weather is by far the biggest cause of cancelation or disruption, although terrorism, power failure, and communicable diseases are other concerns for organisers, according to Fraser.
“If an event is affected by adverse weather, the organiser may have to refund hospitality revenues and that can be a significant financial hit. As a result we are seeing a significant amount of insurance being purchased to cover hospitality,” says Fraser.
Lloyd’s is a leading market for event cancellation underwriting expertise and capacity, according to Fraser. The market will insure many high profile tennis, horse racing, golf and other events with hospitality this summer, he added.
Demand for event cancellation insurance has been increasing following adverse weather in recent years, which has raised awareness of the risk and the cover, says Amanda Lewis, class underwriter at AEGIS London. For example, the Badminton Horse trials were cancelled in 2012 because of flooding while rain stopped play at Aegon Tennis Championships at the Queen’s Club in 2012, triggering a ticket refund, she said.
Event cancellation insurance can help cover costs and lost revenues, including those associated with corporate hospitality, if an event is cancelled, explains Lewis. It can also help organisers meet the cost of refunding tickets and revenues from corporate hospitality if play is suspended, for example if rain limits the number of balls bowled at a cricket match, she says.
Anyone who stands to lose money as a result of an event not going ahead in part or in full can benefit from cancellation cover, according to Boyle. “This can range from a hot dog seller in the street, to the event organiser,” he says.
Following record rainfall in parts of the UK this winter, some racecourses and event venues are at a heightened risk of flooding this summer, reflecting higher water tables and waterlogged ground, according to Lewis. As a result, underwriters have intensified their requests for information and often require event organisers to investigate ground conditions, she says.
“Weather is a significant factor and particularly since the storms of 2012,” according to Boyle. “Insurance companies are focusing a lot more on an organiser’s ability to manage its event should adverse weather affect it during set-up or whilst an event is ongoing,” he says.
Event organisers have stepped up risk management and are much more likely to keep an event going when faced with adverse weather or other risks, according to Fraser. For example, Wimbledon successfully added a retractable roof to centre court and now plans another for Number One court.
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