Lessons from the pandemic for event cancellation coverages

Insurers should prepare for future perils of a similar scale, which might require a public/private partnership.

The Coachella Music Festival in California and Glastonbury Festival in the U.K. were canceled out of precautions related to the ongoing global pandemic. And then, the Tokyo Summer Olympics saw significant disruption, including the elimination of international fan attendance as coronavirus cases surged in Japan.

These are a few high-profile examples of event cancellations in 2021. At a time when many were expecting a return to normalcy, a “summer of fun,” after vaccines were rolled out, the realities of slower vaccination rates and regional surges have event planners and promoters, as well as their musical artist and broadcast partners, fretting about the challenges of holding large events.

Logistics and promotions are no longer the biggest headaches for planners. In 2021-2022 their biggest challenge is obtaining and managing event cancellation insurance. This line of insurance has been one of the most impacted by the pandemic — and the event insurance market is changing fast.

The very future of the event insurance market is threatened as price and risk are becoming major issues. Too often, we take for granted how much different industries rely on insurance as a backstop. When that backstop weakens or disappears, there is a ripple effect across the given industry and economy.

Going forward, providing coverage for pandemic-related losses for large events will likely need a public/private solution. The industry needs to support and develop vehicles and expertise that can help us better manage pandemic risk. Although reaching a public/private solution will be complicated and may take time, the industry must ensure that it has a seat at the table so that the “private” element of any partnership works to efficiently leverage insurance balance sheets.

Of parallel importance, the industry must develop, invest and apply agile technologies that can help the industry reliably and prudently offer affordable and relevant coverage. In the post-pandemic world, insurers will require more granular scrutiny of policyholders as well as a sharper focus on aggregation risk, which until recently has received minimal attention in this space.

Achieving this at scale is extremely difficult without the aid of technology. With advanced technology, particularly cloud technologies and predictive and risk modeling, we can efficiently harvest relevant data that makes analyzing risk more effective and accurate. This combination enables our industry to achieve “continuous underwriting,” which provides a wealth of on-demand, detailed data in a matter of minutes and enables underwriters to track exposures throughout policy lifecycles.

The onset of COVID-related delay and cancellation coverage created for the TV and film industry by specialist MGA SpottedRisk is a good example of how a highly analytical approach can unlock innovation and opportunity in a challenging market. It also serves as a warning to mainstream insurers about how quickly gaps in the market can be filled by more agile players.

Data, analytics are just the start

Although it is necessary to bring more data and analytics to bear on complex risk problems, that should be considered as just the start. As an industry, we must also enable the data to flow more efficiently throughout the insurance network. That will help expedite innovation and develop new value propositions needed to address pandemic-related challenges, as well as future disruptions.

Paul Mang, chief innovation officer at Guidewire. (Credit: Guidewire)

This is the focus of the developing field of “connected-insurance,” a term that refers to the need for improved data standards, increased data sharing and better systems for enabling data to flow among entities.

Today, insurers and brokers are investing in tracking and curating their data and accessing external data. But the industry will need to develop a more connected platform so that creative solutions can be developed for vexing problems, and the data made available to feed those solutions.

As the world sees ever more complex risks, the industry must find a way to respond positively and proactively. Today’s challenge in the event-cancellation space is just one example of how “connected insurance” may play out, and it provides us with an opportunity to learn how to evolve our response as an industry and as individual companies.

Specific Technologies Driving Insurtech Investment in 2024

Understanding the Funding Decline The decrease in funding does not necessarily spell trouble for the insurance sector but instead highlights a strategic shift, the report suggests. “The insurance industry, like many sectors, is focusing on the most promising ventures with substantial insurance potential,” the report explains. “Insurers are directing their investments toward key areas and current trends such as embedded insurance, employee benefits, and cyber risk management. This strategic investment approach signals a forward-looking mindset within the industry.” Three Key Insurtech Trends for 2024 The report identifies three major trends shaping insurtech investments in 2024: Public Insurtech Companies: Financial and Growth Strategies The report also notes that public insurtech companies are prioritizing revenue growth as their main goal. These firms are restructuring their financial strategies to boost cash flow and capitalize on rising revenue streams. Their growth prospects are supported by expanding asset portfolios and strong market demand. “Public insurtech companies are focusing on revenue growth and optimizing their financial frameworks to increase cash flow,” the report states. “The growth potential for these companies is driven by increasing revenue opportunities, broadening asset bases, and a robust market for their services.” In summary, while global insurtech funding saw a decline in 2023, the industry’s focus on GenAI, digital process management, and connected insurance technologies is setting the stage for a dynamic and forward-looking 2024.

Business

Insurer Secures Unanimous Supreme Court Victory in New York Choice of Law Dispute

In the world of sports, a clean sweep, a shutout, or a perfect game is the ultimate achievement. In the legal arena, a unanimous decision from the U.S. Supreme Court is equally rare and significant. In a notable legal triumph, Great Lakes Insurance SE achieved a unanimous 9-0 victory in the Supreme Court on February 21, 2024. This victory follows a protracted legal battle that began in the District Court of Pennsylvania, advanced to the U.S. Court of Appeals for the Third Circuit, and culminated in the Supreme Court’s decisive ruling. Background of the Case: Great Lakes Insurance SE v. Raiders Retreat Realty Company The heart of the dispute was the insurance contract’s clause selecting New York law to govern any future legal conflicts. Although the financial implications of this case were relatively minor compared to the broader marine insurance industry, the insurer’s determination to uphold a crucial maritime legal principle has significant long-term implications for marine insurance. Faced with the insured’s counterclaims—including allegations of breach of fiduciary duty, insurance bad faith, and violations of Pennsylvania’s Unfair Trade Practices Law—the insurer was confronted with serious risks. Such claims could lead to the shifting of attorney’s fees, treble damages, and more, which might normally encourage insurers to settle rather than risk pursuing justice. However, Great Lakes Insurance, supported by The Goldman Maritime Law Group, opted to challenge the Third Circuit’s decision and seek clarity from the Supreme Court. Supreme Court Ruling: A Landmark Decision In a landmark ruling, Justice Brett Kavanaugh affirmed that choice of law provisions in maritime contracts should be upheld by default. This ruling is a major victory for establishing a consistent federal standard in maritime law and avoiding a patchwork of state laws that could complicate marine insurance disputes. The Supreme Court’s decision overturned the Third Circuit’s earlier judgment, which had questioned whether Pennsylvania’s public policy concerns might override the insurance contract’s choice of New York law. By upholding the New York choice of law clause, the Supreme Court eliminated the extra-contractual bad faith claims under Pennsylvania law, thereby ensuring that the dispute could be resolved based on the merits of the insurance claim itself. Significance of the Supreme Court’s Decision This ruling represents a significant advancement in maritime law, affirming that choice of law clauses in maritime contracts are generally enforceable. The decision establishes a clear, uniform legal framework for resolving maritime contract disputes, which will streamline the process and ensure fair adjudication of future insurance claims. Justice Clarence Thomas’s concurring opinion was particularly notable for its criticism of the 1955 Wilburn Boat v. Fireman’s Fund Insurance decision, which had previously influenced maritime insurance law. Thomas argued that Wilburn Boat was incorrectly decided and stressed that a uniform and enforceable set of rules is essential for the development of maritime law. Impact on the Marine Insurance Industry The Supreme Court’s decision sets a “bright-line” rule affirming that choice of law clauses are valid unless there is a strong argument against the selected jurisdiction. By endorsing New York’s insurance laws as a reasonable choice, the ruling supports a more consistent and predictable legal environment for marine insurers. This decision represents a major step forward in maritime law, helping insurers better assess risks, determine premiums, and ensure fair and efficient resolution of maritime insurance disputes.

Lessons from the pandemic for event cancellation coverages