Most professional associations and trade groups make 80% of their annual revenue from a single convention. They spend their entire year planning for that week-long event to generate exhibitor fees, continuing education revenue, registration sales and business growth from networking. If the event is cancelled because of a hurricane, earthquake, airline union strike or… wait for it… COVID-19, they could lose a significant portion of their annual revenue, if not be put out of business entirely.
Obviously, COVID-19 has forced unprecedented cancellations of conferences, conventions, trade shows, sporting events, meetings and other revenue-generating events around the world, causing millions and millions of dollars in losses. Looking ahead to 2021, what can these groups do to protect their investments in future events? What does the new world of event cancellation loss look like? What risks should be considered in transitioning to virtual events?
Virtual Coverage is a Thing
Numerous organizations have pivoted to hosting virtual conventions in lieu of in-person ones. These online events are an important way for businesses to reach clients and tout new products and services. They may not be as exciting as a trip to Vegas or Orlando replete with post-breakout-session drinks at the hotel bar, but they are a silver lining in the convention cloud that allow for continuing education and virtual exhibition opportunities.
However, virtual events still carry risk. Associations need to hire third-party tech consultants to make sure the event goes off without a hitch and that sessions are recorded and distributed properly. That’s all insurable. Virtual event coverage can mitigate exposure from problems like internet outages or hurricanes knocking out communications.
Traditional Cancellation Coverage Is Critical
The insurance industry simply doesn’t have the ability to cover the kind of reaction to a pandemic that we’ve seen. But pandemics aren’t the only cause of cancellation and associations still need coverage for traditional causes of loss in order to plan for future events and revenue. Conventions are usually planned two to three years out. Associations sign contracts with vendors to secure the dates and need insurance policies in advance of those dates.
What’s Covered and What’s Not?
Natural disasters like hurricanes, earthquakes and snowstorms that ground planes are the most common causes for cancellation and are a covered loss. Most man-made causes are also covered. A fire at the venue, airplane labor union strikes, terrorism events around the world, the government taking over the Javits Center for use as a hospital —all of these are outside the control of the association and are covered. We had a convention in Philadelphia that was shut down inadvertently by the attendees themselves when city construction crews showed up Monday morning at the start of convention week and started jackhammering the sidewalk, blocking access to the building. That’s a covered loss. Luxurious incentive trips offered to top salespeople that get rained out can also be covered.
What’s not covered is if the insured decides to cancel the event because of something like a change in the organization, such as direction by a new CEO. Only if something happens to the insured, not by the insured, are claims triggered.
When an event is cancelled, groups don’t just lose revenue, but all the costs associated with hosting, from renting the convention hall to paying the small army of independent contractors. Medical associations, for example, have huge expenses in bringing in state-of-the-art medical equipment to exhibit that can take months to set up. The ripple effect on transportation and shipping is extensive, and all covered by the cancellation policy.
Even in the COVID era, the convention must go on… eventually. As you plan for 2021 and beyond, reach out to learn more about how we can help place cancellation insurance for your conference, convention, trade show, expo, sporting event, concert, consumer or outdoor event.
And stay tuned for Part 2 of our blog where we look at the post-COVID landscape of the event cancellation insurance market as well as brand new insurance products coming to market.
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