Taking cover

When the heavens opened on the British Grand Prix In April, Silverstone was forced to weather the storm without any insurance cover. What are the benefits of insuring corporate events?

If you phone Silverstone at the moment, you will be put through to a voice message explaining that if you hold tickets for the April Grand Prix, you will be contacted by Silverstone in writing. This is probably to fend off the tens of thousands of disgruntled ticket holders who either didn’t manage to get to Silverstone or missed part of the action.

Given that Silverstone had no say in the fact that the British Grand Prix, normally held in sunny July, would be moved forward to unpredictable April, the circuit is handling the fall-out rather well.

What Silverstone had to deal with was not merely a case of April showers. According to Silverstone spokesman Peter Morris, the circuit was subjected to 83 million gallons of rainfall in the three weeks leading up to the Grand Prix. In fact, the weather conditions were the worst since records began in 1766.

Silverstone will have to deal with the financial loss of refunding spectators, who paid up to £75 each for grandstand seats, which is expected to cost the company £4m. But the company will also have to consider the lost revenue from corporate hospitality bookings which were down considerably on previous years – probably because organisers were only too familiar with April weather conditions.

Corporate hospitality visitors, in fact, fared much better than the punters – they were helicoptered in.

But was there anything Silverstone could have done to prevent a wet weekend turning out to be so expensive? Morris says the company takes out insurance against cancellation of an event caused by third parties (in this case the race organisers), but admits there was no insurance against the weather conditions it was faced with this year. And although Morris says Silverstone may review its insurance coverage, it is more than likely that the British Grand Prix date will revert to its normal July date after this year’s fiasco.

Many event organisers take out insurance against cancellation due to adverse weather conditions. However, unlike other sports such as tennis, horse-racing or cricket, which tend to be cancelled at the drop of a drizzle, motor-racing goes ahead in any weather. The irony, says Morris, is that the worse the conditions, the more exciting the event is for spectators.

Motor racing also carries the weight of live global coverage, with viewing figures sometimes higher than 350 million. When satellite broadcasting time has been booked in advance, the fact that spectators can’t get to the event is no reason to cancel.

There are insurance policies that cover loss of revenue from people not being able to turn up to an event for whatever reason. Russell Collier is manager of Weather Direct, an insurance company that provides policies for event organisers wanting to protect themselves against foul weather.

He says: “At Silverstone, for example, we could have provided cover against loss of earnings for those people who did not manage to get there.” Presumably, however, the policy works better for events where people turn up on the day, rather then pre-paid events such as the Grand Prix.

Calculating cover

However, Collier says to arrange cover, the insured party decides how long before and during the event attendance may be affected by rainfall, and insures for that period. Once it has rained for ten continuous minutes, cover comes into place. Policy premiums are calculated on historic rainfall figures for every day of the year and every hour of the day for the last 30 years. These figures are available for every postcode in the UK. Given the Silverstone experience, Weather Direct might be grateful they weren’t insuring the Grand Prix.

Collier points out that the weather is not the only problem facing event organisers. “With indoor events, the main problem is power failures, which affect food and lighting.”

Insurers also provide policies covering cancellation or abandonment of an event. Under these types of policies, says Terry Waller, managing director of event insurer Insurex Expo-Sure, funds can be provided for remedial action.

At Silverstone for example, says Waller, a policy such as this may have enabled the track to hire decking to cover the car parks, which had become water logged and were causing most of the problems.

In the event, Silverstone did hire contractors for most of the Saturday to put down 300 tonnes of concrete to improve the car parks. It is not known whether this was covered by insurance.

Wimbledon is another corporate hospitality event which is predictably wet and is increasingly being insured – at a cost, according to some, of at least five per cent of the total budget allocated.

Waller says: “We have insured many groups going to Wimbledon and our underwriters have paid up large losses for the tournament.”

Event Assured provides a unique policy, called Reduction In Quality, used mainly for the incentive travel market.

Ensuring the incentive

Event Assured managing director Brian Kirsch says that if people miss a key event or some part of an incentive trip because of, for example, flight delays, the policy will provide money to organise a similar event in the UK. “We don’t just hand out cash, because the whole point of an incentive trip is to motivate people through means other than money,” says Kirsch.

He adds: “Underwriters prefer to pay for saving an event rather than cancelling it.” He sites the case of a client who had organised a trip to Madrid with a gala event to be held on the Saturday night. Soon after the group arrived in Madrid, a transport strike was announced. “In this case, we advised they hire private transport and not cancel the whole event.”

Mark Batey, director of events at event organiser Skybridge, says that when it comes to events such as the Grand Prix, “we always advise that guests are helicoptered in. It’s the best way to do it – no matter what the weather. It’s not that expensive when you can do it 40 people at a time in a Chinook.”

Batey describes an incident last year when Skybridge had organised a conference for 400 people in New Orleans. While they were there, a hurricane swept through the state. The airports were closed and curfews imposed. “We were sandbagged in the hotel with 400 delegates. We were not able to leave for 48 hours after we were supposed to.

“Under these circumstances, the hurricane was seen as an act of God. We were insured but we were also able to negotiate a low rate to stay in the hotel for the extra 48 hours.”

The moral of the story is to get insurance. Insurers say that, generally, it is not difficult convincing organisers to take out a policy, particularly in the exhibition business.

Waller at Insurex Expo-Sure says, however, that organisers of some of the smaller festivals and concert promoters “tend to rely on self-insurance – and that does not work”.

The best thing to do, according to Waller, is to act as if you are uninsured – then not a lot of things can go wrong. If only that were true for Silverstone.

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