When celebrities collect their Oscars on Sunday, none of them will thank insurers.
But it’s the insurance industry that makes entertainment production possible, whether it’s movies, live concerts, or even a virtual event. They all need all kinds of insurance.
“The entertainment industry had a very positive year in 2022, and a welcome recovery is definitely underway, but we are not out of the woods yet,” says Michael Furtschegger, global head of entertainment at Allianz Global Corporate & Specialty (AGCS).
AGCS serves the global entertainment insurance market and has insured five of the 10 movies nominated in the Oscars’ Best Picture category in 2023.
“In the three years since the coronavirus first hit the headlines, the world has changed,” Furtschegger said. “The sector must continue to evolve in line with new technologies, proliferating platforms and seismic shifts in patterns of consumption, as well as changes in the public mood, particularly among younger generations.”
Health and safety protocols, crowd safety, more extreme weather and technology risks are all growing concerns for entertainment insurers.
Lights, cameras, insurance
Just about the only thing you can’t insure when making a movie is good reviews.
Everything else needs to be insured, from cameras and stuntmen to animal mortality, drug overdoses and even kidnap and ransom coverage.
Movies are slowly rebounding after months of theater shutdowns during the COVID-19 pandemic. Global box office receipts hit $25.9 billion in 2022, reports Gower Street Analytics, a 27% gain over 2021 but still 35% behind the average for the three years before the pandemic (2017 to 2019).
“Our entertainment clients are feeling the effects of inflation, with increased production and live-event costs,” Furtschegger said. “The Covid crisis and the recent tragic shooting incident on a film set have shown that the industry needs to remain vigilant about its health and safety protocols.”
The effects of climate change and the shutdowns during the pandemic brought home the importance of imminent peril provisions to cover losses due to weather threats, wildfires, or other specified shutdowns that delay filming. These costs can quickly add up to millions of dollars for big-budget films
Production insurance coverage can vary widely, but most productions have cast insurance, which protects producers against losses or extra expenses to complete principal filming due to the death, injury, or illness of insured artists or directors. Today that can include the cost of using digital images and special effects to stand in for an actor and complete a film.
Following the death of Fast and Furious actor Paul Walker in 2013, Fireman’s Fund paid Universal Pictures a $50 million insurance claim, the largest ever such claim to date. Disney filed a $50 million claim with insurer Lloyd’s of London after Star Wars actor Carrie Fisher’s died in 2016 before completing filming for the franchise’s third trilogy.
Productions also need third-party liability coverage to protect against the cost of defending and settling a lawsuit, which has been brought to the front of mind following the October 2021 fatal shooting on the set of “Rust.” Additionally, general liability covers claims of bodily injury or property damage occurring during filming, live events, or performances.
Protections are also available for losses sustained after filming, such as library stock coverage and faulty stock coverage. And errors and omissions insurance protects producers from copyright claims and unauthorized use.
Increased production costs and risk mean an increased need for insurance.
“Businesses need to know they have sufficient insurance cover for sophisticated productions,” says Wanda Phillips, head of North America entertainment insurance at AGCS. “Where costs increase, so too do exposures because the costs are higher with each day of shooting, and this could be reflected in any insurance loss.”
The rise of virtual events
Virtual events continue to grow in popularity in the wake of the pandemic. The virtual events market was valued at over $114 billion in 2021 and is expected to grow at a compound annual growth rate of 21.4% from 2022 to 2030.
Virtual reality (VR) is the fastest-growing entertainment and media segment, reports PwC, with global VR growth between 2021 and 2026 expected to bring the segment to $7.6 billion. Gaming is forecast to be 85% of total VR revenue by 2026. Video games continue to develop as a spectator sport, with the total number of esports viewers worldwide possibly exceeding 640 million by 2025, according to a recent report.
Even without live audiences, virtual events carry risks and need insurance. Transmission failure because of weather, natural catastrophe and network issues are common problems that can bring a virtual event to a halt. Rented equipment and studio space can also be vulnerable to property and casualty liabilities.
Emerging entertainment risks
Climate change also impacts how entertainment insurance is written for live events.
“We’re seeing more abnormal weather-related events – heavy storms and flooding in Europe and bushfires in California, for example,” says Furtschegger. “These inevitably cause havoc for live events, both in terms of cancellation exposure but also damages and human safety.”
Recent tragedies, such as the crowd crush that killed 10 and injured hundreds at the 2021 Astroworld Festival, have re-ignited the awareness of the dangers beyond COVID-19 when it comes to large live events.
“Crowds have always carried inherent risks,” adds Kurt Miner, managing director, entertainment, at Allianz Risk Consulting, North America. “Event organizers are now better able to monitor large groups of people and keep them safe, as well as artists, with the use of real-time video monitoring.”
“Safety experts can remotely monitor two or three events, which could each be taking place over 15 acres or more, spotting risk concerns such as blocked exits or damaged barriers,” he said. “They can also monitor social media to pre-empt gate-rushing and prevent stampedes, sending a security contingent to the location before the situation gets out of hand.”
Slips and falls are the most common cause of claims from live-event policies, so organizers should ensure medical staff and transport to local medical facilities are on site.