How event organisers can prepare for potential cancellations and protect themselves against unforeseen risks

How event organisers can prepare for potential cancellations and protect themselves against unforeseen risks

The onset of the Covid-19 pandemic in 2020 had a ripple effect across a broad range of industries. Among the most affected industries was the events industry – particularly events that relied on face-to-face participation. The cancellation of an event has a far-reaching impact on aspects such as event positioning, brand reputation, and customer and stakeholder relations. Arguably, the biggest impact for the event host involves financial risk. One way of mitigating the potentially devastating effect of sudden cancellation is to ensure that you have adequate event liability insurance.

The financial impact of an event cancellation is multi-faceted and best illustrated by means of an example. The Two Oceans Marathon, an annual event that attracts thousands of participants from all over the world, costs over R30 million to stage. This figure includes the cost of event infrastructure, event-related merchandise, medals, planning and logistics. Its cancellation in 2020, due to the pandemic, dealt a massive blow to the organisation, as well as to internal and external stakeholders.

When an event is cancelled, losses occur across a range of aspects. The refunding of participants is among the most pressing issues. Other challenges include the payment of staff, losses related to deposits paid for rented infrastructure and venues, and irrecoverable expenses related to signage, merchandise, communications and technology.

Organisers of events held in South Africa are bound by the Safety at Sports and Recreational Events Act of 2009 and can be held liable for the safety and security of attendees. This means, if an event is cancelled for a reason beyond the organiser’s control, they will nonetheless be held responsible for any losses incurred.

From concerts and festivals, to sporting events and theatrical productions, several event organisers opt to insure against this specialist area of risk by purchasing liability cover. This kind of insurance will cover losses if an event is cancelled, interrupted, postponed or relocated for reasons beyond the organiser’s control. These could include adverse weather conditions, civil unrest, the non-appearance of a key individual, or the outbreak of a communicable disease.

A number of factors will influence the kind of policy that an event organiser needs, including the nature and scope of the event, and the unique risks involved. Liability insurance policies for event organisers are therefore tailored on a case-by-case basis.

Concert organisers, for example, may decide to mitigate the risk of the performer falling ill or being unavailable for an unforeseen reason, by including cancellation as a result of non-appearance, as a clause in their policy. A corporate hosting an event that requires entire divisions or departments to travel to an overseas destination, may find it prudent to cover themselves for travel, catering, equipment, venue hire and accommodation expenses that will not be recoverable if the event is cancelled. Each of these examples will require nuanced clauses in their policy to ensure that every eventuality is accounted for.

There are several determinants of what is insurable, which will vary according to the policy involved as well as the insurance provider you choose. In certain cases, for example, cover for the financial loss related to adverse weather conditions needs to be finalised at least two weeks prior to the event. In these instances, a loss adjuster will be appointed before the time and will decide, in conjunction with the insured, whether it is deemed necessary for an event to be cancelled because of weather-related reasons.

In some cases, such as for international events, insurance for event cancellation may be a mandatory requirement of stakeholders and investors. Where such liability cover is not compulsory, however, it is prudent for event organisers to take a long-term approach to their planning and to cover themselves against the risk that unforeseen circumstances could derail even the most well-made plans.

Additionally, due to the complex nature of this insurance and the requirements thereof, it is important that clients contact their adviser to ensure they are appropriately guided and that the correct cover is obtained for the clients’ needs.