Game, Set, Cancelled? Tuesday 25 June 2013 (source: Lloyd’s of London)
For many, the Wimbledon tennis tournament signals the start of a packed summer of sporting and social events. However, it can also be an unwelcome reminder of how the Great British weather can spoil our enjoyment of such big occasions.
The summer of 2012 – the wettest in a hundred years – led to the cancelation and abandonment of many events, large and small. In fact, five out of the last six UK summers have seen above average rainfall, according to UK forecaster the Met Office.
This unseasonal weather has led to increased demand for weather related cancellation insurance from insurers, including the Lloyd’s market.
The 136th Wimbledon Tennis Championship promises two weeks of fantastic world-class tennis, but rarely does the competition pass without a few downpours disrupting play. Fortunately the event has proved relatively resilient to disruption from adverse weather, a situation much improved by the construction of a retractable roof over Centre Court.
The 136th Wimbledon Tennis Championship promises two weeks of world-class tennis, but rarely does the competition pass without a few downpours disrupting play. Fortunately the event has proved relatively resilient to disruption from adverse weather, a situation much improved by the construction of a retractable roof over Centre Court.
In addition, Wimbledon has historically purchased event cancellation cover, including rain insurance to cover the cost of refunding ticket holders when rain disrupts play for all but one hour of the day. Cover has again this year been placed at Lloyd’s, although details of the insurance are kept under wraps.
More and more sporting events – including more weather-tolerant winter sports such as football and rugby – buy cancelation insurance, driven by their broadcasting commitments, explains Amanda Lewis, an underwriter with AEGIS London. Sponsors of summer events – such as country shows and music festivals – also increasingly require organisers to purchase event cancellation cover, she says.
The cover is typically purchased by event organisers, venues, sponsors and sports teams, as well as associated event industries such as catering, hospitality and retailers. Weather is the most commonly insured risk, although cover is also available for cancellation due to terrorism, periods of national mourning, infectioys disease, and property damage, such as a fire.
Weather is the number one risk for outdoor events in the UK, according to Duncan Fraser, Partner at JLT Sport, part of Lloyd’s broker JLT Speciality.
“We tend to think of events like Wimbledon and sports like cricket when thinking of the effects of rain. However there are many events like music festivals and country fairs that have significant exposure in terms of costs and lost revenues – the financial consequences of which can be grave, ” he says.
Last year was disastrous for outdoor events in the UK, with record rainfall from April through to June, and heavy rain continuing well into the autumn. Many large events were cancelled, including the two-day music festival MFest, Badminton Horse Trials, Great Yorkshire Show and the Country Land and Business Association Game Fair, which usually attracts more than 150, 000 people.
Following the bad weather of 2012, insurers are now requesting more information as they try to understand better an event’s risk profile and exposure to adverse weather.
What insurers do with the information they receive will be key, says Lewis. A few insurers, including AEGIS London, have developed their own computer modelling capabilities to plot information on weather patterns against individual event risks, she explained.
“In my view people are not analysing the weather trends enough. Insurers need to align the risk information they are now gathering with weather data. Until the insurance market obtains and uses information in conjunction with data the overall situation will not improve, ” says Lewis.
Insurance is typically used to cover the cost of refunding tickets due to adverse weather for events like Wimbledon or cricket’s Ashes Series, which begins in July. It can also cover costs and lost revenues associated with cancelling, abandoning or postponing an event.
“Large sporting, music and summer events often buy cancellation insurance, but many mid and small-sized events were uninsured in 2012, ” explains Fraser.
“However, the summer wash-out of 2012 has led to increased demand for cancellation insurance this year, as well as higher premiums as insurers look to reflect losses and price in the perceived increase in weather risk, ” she adds.
The wet weather has also forced event organisers to focus on risk management and risk transfer, explains Lewis. “The flip side is that 2012 has presented the insurance market with an opportunity. Many previously uninsured events are now coming to the market, which gives insurers a chance to turn things around and improve risk management, ” she says.