Show Stoppers: what happens when an event simply cannot go on?
Johannesburg - There is a great deal of preparation and financial outlay that goes into planning an event – from artist and MC bookings, ticket sales, marketing and advertising campaigns, deposits on stock and equipment, venue hire, staffing costs, catering, security and many more.
But what happens when an event simply cannot go on due to unavoidable external forces – think fire and flood, civil unrest and commotion, weather, injury or death of a key artist, a security breach or cyber threat, or a pandemic!
According to Philip Cronje, Business Unit Manager – Sport, Recreation and Entertainment division, understanding what type of event cancellation cover is available and how it will respond in different scenarios is key to mitigating even the most unusual risks to the success of an event.
“From a South African point of view, external forces pose a very real threat to any event, such as civil unrest, weather, a fire, a flood or even external decisions made by authorities, that are well beyond the control of the organisers, participants and service providers involved in an event. While major events will have insurance cover in place for abandonment and postponement, many smaller events are not necessarily insured for event cancellation,” he explains.
“The South African Safety at Sports and Recreational Events Act (SASREA) firmly places the responsibility on all parties involved in an event to ensure safety at events. This means that every event held in South Africa should have events liability insurance in place as a bare minimum, in addition to upholding health and safety standards.
"However, this would only cover the organisers and sponsors of an event for legal liability relating to safety at the event, while ‘event cancellation and postponement’ would not be covered unless it is taken as an additional cover,” says Philip.
“We often find that some event organisers take the bare minimum of liability cover, purely as a tick-box exercise to cover them in terms of an industry standard and regulation where it exists, rather than looking holistically at every potential risk to their event going ahead at all,” he adds.
Venue owners, event organisers and sponsors will take event cancellation cover to protect their investment in the non-recoverable costs and expenses related to organising and staging an event, such as promotional material, staff costs, merchandising, advertising, supplier bookings and so on. The cover can also be geared to cover the loss of income if an event is cancelled or interrupted and would cover ticket cancellation costs, for example.
“An event cancellation policy will typically respond according to the event’s running expense budget. As a result, many venue owners, event organisers and sponsors manage their direct expense budget very carefully in the lead up to an event.
"This could include negotiating with service providers on the size of deposits required on entertainment, stock/equipment and artists; putting a structure in place that benefits both sides of the agreement if deposits need to be refunded due to a cancellation. The goal is however to exhaust every avenue to try and save an event as it is more beneficial to all parties involved for the show to go on,” explains Philip.
While event cancellation insurance is often considered a grudge purchase, its importance and relevance has been thrown into sharp focus following the Covid-19 pandemic. Aon lists a few examples of incidents that could lead to a cancellation of an event:
- Adverse Weather: The added cost of hiring marquees to keep attendees dry, gale force winds collapsing a circus tent, hailstorms, flooding and foggy weather preventing a key speaker from arriving at the venue on time.
- Fire Damage: A fire destroys the exhibition centre a day before the event or a forest fire necessitating the cancellation of a rugby match.
- Structure Damage: A boat show being cancelled due to the collapse of a temporary pool structure, a roof collapse affecting a motor show or a delay in getting a marquee structure finalised delaying the opening of an event.
- Utilities Failure: Power grid supply failure causes shut down of theatre production, a break in water supply causing the postponement of an exhibition, or a denial of access to an event location due to a gas leak requiring a refund all tickets sold.
- Civil Commotion and Terrorism: Riots, strikes and threat of terrorism acts are becoming more and more relevant for event organisers and impact of same can be severe.
“Even with the best planning and risk management measures in place, there will always be the potential for something that is entirely unexpected and beyond human control to go wrong at an event. The need for sound, expert insurance advice and guidance will help businesses make better decisions in the eventing space, helping venue owners, event organisers and sponsors to weigh up the risks to their balance sheet, reputation and business sustainability in times of crisis,” Philip concludes.