Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities.
It is considered to be a difficult product for insurance companies, as the odds of terrorist attacks are very difficult to predict and the potential liability enormous. For example, the September 11, 2001 attacks resulted in an estimated $31.7 billion loss.This combination of uncertainty and potentially huge losses makes the setting of premiums a difficult matter. Most insurance companies therefore exclude terrorism from coverage in casualty and property insurance, or else require endorsements to provide coverage.
Terrorism has led to countless lives lost, a human toll that can never be replaced. But it also destroys buildings, wipes out electronic data, and leaves a permanent mark on how we live our lives.
Police take the potential threat for terrorism very seriously, but it doesn’t stop there. That’s something Steve Stockam has seen every day on the job since the Twin Towers were attacked in 2001.
Steve Stockam, Joplin Apt. Mgr: “We probably spend more time and effort and money on safety and security now than obviously ever before.”
The Joplin Airport Manager will never forget how his job changed on 9/11.
Steve Stockam, Joplin Apt. Mgr: “Those terrorists gained access to the system through smaller airports.”
There are TSA screenings for passengers, but that’s just one small part of the security plan for federal agents.
Steve Stockam, Joplin Apt. Mgr: “Perimeter roads , perimeter fencing or remote gates. Others may come in and look at access within the building itself.”
And then there is the insurance coverage, just in case something happens. It applies nationwide to more than 450 commercial airports in America, a complicated web involving insurance companies and the federal government.
Scott Brothers, Insurance Ctr: “after 9/11 it was determined by the insurance industry that they could not cover terrorism. So the government came in with a backstop for insurance companies for terrorism.”
And Scott Brothers with Insurance Center adds it’s not just airports.
Scott Brothers, Insurance Ctr: “Larger policies like municipalities, large property risks like schools, hospitals, places like that where terrorism may occur.”
It’s not automatic; there are exclusions, buybacks and a $100 billion dollar threshold. Brothers says not many of his bigger clients opt in, maybe just one in ten.
Scott Brothers, Insurance Ctr: “Quite frankly the typical reaction most of the time around here is ‘I don’t need to worry about terrorism, do I?’ they ask me, and I say ‘I don’t know.'”
It’s a serious question when you have nearly $43 million of property to collect. No, it’s not the City of Joplin, but Carl Junction.
Steve Lawver, CJ City Admin: “Every piece of property that we have whether it’s a shelter at the park, whether it’s a community center, or the PD, or punlic works, any of that along with the vehicles.”
CJ has an extensive insurance policy, it’s $133,000 per year, but it doesn’t specifically address terrorism. Different components touch on liability, even riots and cyber coverage.
Steve Lawver, CJ City Admin: “We have things in place to work against that.”
But while buying in to terrorism insurance may not be automatic, preventing the potential act itself is.
JPD Asst. Chief Sloan Rowland: “We are preparing for it. We’ve been preparing for it for years.”
Seen in that increased police presence at large scale events like parades an concerts and through more subtle methods.
JPD Asst. Chief Sloan Rowland: “Response tactics and things that we do really don’t want out just so terrorists don’t know how we respond to different things.”
It’s not to say terrorism wil ever strike the Four States. But in the rare chance it does, police, city leaders and even insurance agents want to be ready.
Charles Gibbs, Managing Director and Jamie Russell, Vice President
Capacity a major limiting factor in expanding remit
Small number of players raising aggregation risk
Cover not reaching organizations that need it most
Restricted capacity, limited modelling capabilities and a lack of demand from smaller organizations are severely hampering the industry’s ability to generate a substantial terrorism market, according to Charles Gibbs, Managing Director, and Jamie Russell, Vice President, Guy Carpenter.
“There has been a major shift in the focus of terror attacks towards mass casualty and fear-inducing events, and away from physical damage,” explains Gibbs. “Yet, terrorism pools are built primarily to address catastrophic damage, while the private market is also geared towards managing this increasingly frequent but minor component of the loss.”
“We are, however, seeing the emergence of more relevant coverage, designed to address non-physical damage-related losses such as loss of attraction, denial of access and active assailant and shooter,” Russell explains. “The issue is more that capacity is limited, and while the threat potential is growing, terrorism remains a specialist market. The challenge is not so much the diversity of cover, but rather the scalability and distribution.”
This limited scale is creating a market imbalance, adds Gibbs, with the sector heavily weighted towards larger-scale corporations, rather than smaller businesses that could benefit most from terrorism cover.
“Limited capacity is driving a much greater market focus on corporates simply because they can generate a better premium return. We must work out how to expand the terrorism insurance remit to companies that lack the financial ballast to ride out the shorter-term,” he says.
Yet, for this to happen, the market has to evolve beyond its specialty origins, or run the accumulation gauntlet. “The small number of players offering terrorism cover significantly heightens the potential for accumulation risk if efforts were made to push cover into the wider market,” Gibbs continues. “At present, there simply isn’t the incentive to extend out to the SME sector.”
Restricted modelling capabilities on the terrorism front remain a stumbling block to this evolution. “The models are limited by a lack of claims data especially for the more diverse covers now on offer,” Russell says. “Development in this area will aid insurers with their portfolio management and unless this is addressed, coupled with modelling capabilities that can support improved frequency analysis, insurers will continue to be restricted in how far they can extend their insurance offering.”
Market expansion is also hindered by a lack of demand. “To extend current modelling capabilities will require extensive R&D investment,” Gibbs believes. “To make that investment to scale-up the terrorism offering will require audible customer demand. At present, we are not hearing the calls for cover, as many either do not sufficiently understand the threat, or do not consider themselves exposed to the peril.”
“If we are to create a substantial terrorism market,” he concludes, “we must create the modelling acumen to support the industry’s efforts to shift from a reactive, opportunistic approach to providing cover, to a more proactive one that extends beyond the larger corporates, while also working to raise awareness of the perils to stimulate appetite at the SME level.”
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Deadly attacks have turned concert venues in Paris, Manchester, and Las Vegas into grisly battlefields. America’s latest mass shooting, which took place during a performance by country star Jason Aldean, took 59 lives, terrified concert-goers and re-opened the debate over gun control in Congress. In the process, these tragedies have shaken up a pivotal industry: the market for terrorism insurance.
John Tomlinson directs the Entertainment Group for Lockton Companies, the world’s largest privately held insurance brokerage. His company insures more than 100 of the entertainment industry’s biggest hip-hop, rock, pop, and EDM acts—and three out of four of them have terrorism insurance. Pacific Standard spoke to Tomlinson to learn why that number is rising.
What exactly does a terrorism insurance policy do, and why do artists need to purchase it?
The history of terrorism coverage needs to be separated into two buckets: pre-9/11 and post-9/11. Pre-9/11, nearly all commercial policies included acts of terrorism within the scope of coverage for effectively no additional premium. Post-9/11, insurance companies began to require a separate purchase for acts of terrorism. For your general liability policy, you could buy back—for a nominal premium—terrorism coverage onto each of those policies. Therefore, if an act of terrorism was to play out and there was a bodily injury or property damage, the coverage would be in a position to respond on behalf of the artist.
There is another element of coverage we do a lot of work with in the music industry, which is called event cancellation and non-appearance coverage. This is an insurance product that touring artists buy to protect their touring income in the event that a situation prohibits them from being able to play the show. Event cancellation and non-appearance coverage excludes acts of terrorism and what’s referred to in the industry as “political violence.” Political violence is usually defined as riots, strikes, civil commotion, political unrest, things along those lines. Since event cancellation and non-appearance coverage excludes claims that result from those things, the artists have to buy a separate terrorism and political violence policy to bring back those coverage triggers.
Why is political violence and terrorism coverage separate from standard non-appearance?
Usually it commands a separate premium. Many times artists elect to only purchase event cancellation and non-appearance coverage for their tours. Historically speaking, many artists would also purchase terrorism and political violence for their shows abroad, outside of the United States, but would not purchase the coverage for their shows inside the U.S. We’re beginning to see that change—really over the last 24 months. We’re starting to see more of our clients requesting political violence and terrorism options for their tours, even if the tour is taking place inside of the U.S.
What kinds of clients are interested in this, and how many?
Generally speaking, greater than 50 percent of our clients are buying terrorism and political coverage to protect their touring income.
We see interest now, regardless of the earnings of the tour. Even our less notable artists understand the need for coverage when they go out on the road. We see it across the spectrum, from our baby bands all the way up to our global superstars.
Are artists on certain tours more likely to purchase terrorism coverage?
It depends on where the tour is routing through—if they’re playing shows in parts of the world that are perceived to be higher risk for threats of terrorism and/or political violence, artists are more inclined to purchase cover for those regions. Domestically, now, we’re seeing a heightened interest in insuring shows that are happening here in the U.S.
What do you think is motivating that, specifically?
There’s a heightened sense of understanding that these types of situations are entirely beyond the control of the artist. Regardless of how good a security plan you have for your tour, there’s not a manner in which you can completely prevent these types of things from playing out, especially as it relates to the live music community. There seems to be a target on the back on the live music community, as we’ve seen now here in Las Vegas.
The artists that have been through a situation like Jason Aldean or Ariana Grande have unique perspective. As a result, management teams are a part of those circumstances also. I think, for the artists, seeing their peers involved in situations where fans that have purchased tickets to come see their performance arrive at the performance and never go back home—the reality in actually seeing those types of circumstances play out has really heightened the awareness of the need for coverage.
What kinds of threats can trigger a claim under this type of policy?
The most common we see are bomb threats to the venue or suspicious packages at the venue. Most of the threats are venue-related. We have seen threats to actual band members increase over the last couple of years, so we’ve actually broadened the coverage wording to include threats made to band members.
How much does this coverage cost?
Relatively speaking, it’s still very competitively priced, depending on where the show is taking place that you’re trying to secure coverage for. We’re seeing rates for political violence and terrorism as it relates to event cancellation and non-appearance pieces anywhere for 0.25 to 1 percent of gross income of the performance that’s being covered.
What risk does an artist take on by not getting terrorism insurance?
In typical artists contracts, the promoter is absolved from liability if a threat of terrorism or an act of terrorism prevents the show from taking place. If they don’t have the coverage and the contract with the promoter stipulates that the promoter is absolved from liability, then the artist does not get paid their money, and, more times than not, has to send back or return deposit money that they’ve already collected from the promoter.
Why might an artist need to cancel later shows after an incident?
You could have a situation in which the artist and their production team are injured, which may result in a cancellation. In the case of Ariana Grande, the venue that she was playing became a crime scene, so all of her production gear was held in the venue for an extended period of time, which prevented her from being able to play shows subsequent to Manchester.
What are the risks associated with putting on a large concert?
The big focus now is on venue security. Unfortunately, we’ve learned that there’s no way to mitigate these losses or eliminate these types of claim situations entirely. Especially on the heels of Las Vegas, the biggest focus right now is on security detail for the events.
How are recent terrorist attacks on concert venues—Manchester, Las Vegas—affecting your company and the industry in general?
It’s required us to re-evaluate the policy forms, because we see different types of acts and threats playing out globally now. We’ve had to broaden some language. Unfortunately, these policies have been stress-tested in many different ways over the last handful of years. It’s just educating our client to the risks that they face, certainly in different geographic regions but now here in the states as well. It’s really been more of an educational process.
Do you think there will be a continued need for this?
I do. As long as we see these types of situations continue to play out and claims continue to be paid, that will have an impact on the offering of coverage and the price to purchase it.
This interview has been edited for length and clarity.
A string of deadly attacks at music events — including the Oct. 1 mass shooting in Las Vegas at the Route 91 Harvest festival — is pushing artists to invest in something most didn’t think they needed: terrorism insurance.
“Now more than ever they are targets,” says Steves Rodriguez, business manager for Fifth Harmony.
Political violence and terrorism (PVT) insurance policies have been available for decades, but they have been a tough sell unless artists are touring in volatile regions like South America or Eastern Europe. But after the killing of 58 concertgoers in Las Vegas that took place while Jason Aldean was onstage; the bombing outside Ariana Grande’s show in Manchester, England, in May; and the 2015 attack on the Bataclan nightclub in Paris, reps are now advising talent to buy the coverage no matter where they tour.
“Not everybody believes it’s necessary,” says Bill Tannenbaum, a business manager who specializes in representing touring artists. “I’m pretty vocal about taking it with my clients, and luckily we had it with Ariana Grande.” The singer canceled multiple stops on her tour after the attack before returning to Manchester for a benefit concert.
Standard nonperformance insurance costs about 2 percent of the artist’s guarantee and pays a claim (usually about 80 percent of appearance fees) if shows are canceled for reasons like illness, injury or natural disaster. A PVT add-on costs about an extra half-percent.
“It’s usually a battle with the artist to buy it,” says attorney Dina LaPolt, who represents Britney Spears and Steven Tyler. “If you get paid a million dollars, all of your tour costs come out of that million. So every penny counts.”
Even the threat of an attack can trigger a claim. “The way [policies had] been written previously is, the threat had to be related to the venue,” says John Tomlinson, who leads the entertainment group of Lockton Cos., the world’s largest privately held insurance brokerage. “We have expanded that language to include threats made to bandmembers,” he says. Policies might also cover a show that is impacted by an attack within a certain time or distance, say within a week of the event or within 50 miles of the venue.
LaPolt says she also tries to add terrorism into the force majeure provision in appearance contracts. That way, in the event of an attack, both the artist and the tour promoter’s obligations are negated, preventing a breach of contract lawsuit.
While no one could truly prepare for a tragedy like the one in Las Vegas, LaPolt says recent attacks have made terrorism insurance more common. “If it’s a big tour and you’re a high-profile artist and you gather tens of thousands of people per show, you have to have it,” she says.
Nor is the need exclusive to musicians: Other live events, like NCAA tournaments and trade shows, are buying coverage. And Orange Is the New Black showrunner Jenji Kohan told THR recently that she took out terrorism insurance on her office building because she expects a show she’s developing about a teenage Jesus to be controversial.
“You’re always going to do something that someone doesn’t like,” said Kohan. “And you don’t know how crazy that someone is going to be.”
This story first appeared in the Oct. 18 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
1. MORE CONCERTS INVESTING IN TERRORISM INSURANCE AFTER VEGAS SHOOTING: Recent terrorist attacks at music events such as the Route 91 Harvest festival in Las Vegas is driving more artists to invest in terrorism insurance at concerts. Billboard: “Political violence and terrorism (PVT) insurance policies have been available for decades, but they have been a tough sell unless artists are touring in volatile regions like South America or Eastern Europe. But after the killing of 58 concertgoers in Las Vegas that took place while Jason Aldean was onstage; the bombing outside Ariana Grande’s show in Manchester, England, in May; and the 2015 attack on the Bataclan nightclub in Paris, reps are now advising talent to buy the coverage no matter where they tour. ‘Not everybody believes it’s necessary,’ says Bill Tannenbaum, a business manager who specializes in representing touring artists. ‘I’m pretty vocal about taking it with my clients, and luckily we had it with Ariana Grande.’ The singer canceled multiple stops on her tour after the attack before returning to Manchester for a benefit concert. … Even the threat of an attack can trigger a claim. ‘The way [policies had] been written previously is, the threat had to be related to the venue,’ says John Tomlinson, who leads the entertainment group of Lockton Cos., the world’s largest privately held insurance brokerage. ‘We have expanded that language to include threats made to bandmembers,’ he says. Policies might also cover a show that is impacted by an attack within a certain time or distance, say within a week of the event or within 50 miles of the venue.” http://bit.ly/2yzEKrK
2. HURRICANES AND FIRES FORCE COUPLES TO FIND ALTERNATE WEDDING VENUES: The aftermath of disasters like the California wildfires and numerous hurricanes has forced many couples to quickly find alternate wedding venues. The New York Times: “As Hurricane Harvey swirled closer to the Texas coast at the end of August, Mr. Siegfried, a 40-year-old program director for Hearst, and his fiancé, a 43-year-old personal trainer and group fitness instructor for the Y.M.C.A., grew uneasy. From their Sugar Land hotel room the day before the wedding, they watched as airlines canceled flights and weather predictions grew dire.‘We didn’t have time to get upset — we just went into attack mode,’ Mr. Siegfried said. He worked on securing space for the wedding at a Brazilian restaurant they had considered for the rehearsal dinner, which had a large enough space to accommodate guests already in town. Mr. Stockbridge bought up the roses, gladiolas and any other pink or purple flower he could find at the grocery store, mobbed with people buying canned food and water. A friend hunted down a two-tiered wedding cake. And by five o’clock, with Mr. Stockbridge’s sister officiating, they were exchanging vows, toasting their marriage and dancing the flash mob before 49 guests, as the first gusts of wind and rain arrived. Extensive damage caused by Hurricanes Irma and Maria, which devastated several islands in the Caribbean, has forced numerous brides and grooms to rethink their weddings that were scheduled into the winter months. Some resorts on the islands of Anguilla, St. Barth’s, St. Maarten and St. Thomas will remain closed through December, maybe later, to complete repairs. ‘Even the couples who think of everything can’t prepare for this level of stress,’ said Joann Gregoli, a New York-based destination weddings planner who started a Facebook page called Hurricane Irma Crashed My Wedding to help brides and grooms replan their big day at no charge.” http://nyti.ms/2yAxk9s
3. POLE-DANCING MAY BECOME AN OLYMPIC SPORT: Pole-dancing may become an Olympic event in the future, after it was provisionally by the Global Association of International Sports Federation earlier this month. Washington Post: “Observer status is the first step international federations must achieve before becoming full GAISF members, which serves as a great boost for any sport hoping to one day land in the Olympics. And that is exactly pole-dancing’s goal, according to International Pole Sports Federation President Katie Coates, who lauded the day the decision was made on Oct. 2 as ‘historical.’ … The road to the Olympics isn’t short, however. Along with a recognized governing body, prospective sports must also gain separate recognition from the International Olympic Committee. Provisional IOC recognition lasts three years, during which committee members decide whether to give it full recognition. If successful, the sport’s governing body still needs to then petition to become an official Olympic sport, which can take several more years. For Coates, however, those obstacles do not sound insurmountable, considering the uphill battle she said she faced while campaigning to gain provisional recognition from the GAISF. Today, pole-dancing competitions are as family-friendly as any sporting event—and just as well regulated. The IPSF outlines its rules, judging and other criteria in its 137-page document, that lays out guidelines for several categories of competition, ranging from youth to mixed doubles to para-competition. Pole dancers are even required to take doping tests to ensure the sport is clean.” http://wapo.st/2yVCJct
* LOCAL NEWS *
ATLANTA: The eighth annual Country Living Fair will take place October 27-29 at Stone Mountain Park.
BOSTON: Mija Cantina & Tequila Bar will host a Día De Los Muertos celebration on October 27.
MIAMI/SOUTH FLORIDA: Celebrity Cruises will be the presenting sponsor of Miami Beach Gay Pride 2018, which will take place April 2-8.
NEW YORK: The Horny Ram will host its first-ever Halloween cocktail contest on October 25. Along with the competition, the invite-only event for media will offer light bites, Halloween-theme cocktails, and a live cocktail demonstration from Cody Goldstein of Muddling Memories.
Little Kids Rock, a nonprofit dedicated to restoring, expanding, and innovating music education in public schools, raised $1.3 million at its annual benefit, which took place October 18 at the PlayStation Theater.
ORLANDO/CENTRAL FLORIDA: Hard Rock Hotel Daytona Beach has named Kevin Hines as general manager of the new oceanfront property that is scheduled to open by the end of 2017. The hotel will have 200 rooms and 20,000 square feet of indoor and outdoor meeting space.
TORONTO: The Toronto Public Library Foundation’s fifth annual Hush Hush fund-raiser, an event hosted by the foundation’s under-45 members program New Collections, will take place Saturday at the Bloor/Gladstone branch. The event theme is inspired by Canadian landscapes.
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RIMS report notes attack factors including season of the year and geographic region.
The United States is no stranger to acts of terrorism. In recent years, domestic and international events have increased with alarming frequency. More importantly, such events have shown that no area of life is completely risk-free.
Domestically, notable acts of terrorism have occurred on school campuses like Virginia Tech or Sandy Hook Elementary School. Just this month, Las Vegas experienced the deadliest mass shooting in modern U.S. history.
Concern over terrorism risk is clear and definite, but information and understanding of terrorism risk insurance is not as well known. Not-for-profit organization RIMS tackles this subject in its latest report, Terrorism Insurance: Understanding the Boundaries of Coverage for a Risk Without Borders.
Guidance for risk managers
The report provides corporate risk managers, insurance brokers and coverage counsel with guidance on determining whether terrorism risk insurance coverage is necessary, identifying terrorism risk solutions that exist in the market and insights on negotiating for terrorism coverage.
“With terrorism risk being an unfortunate reality, corporate risk managers and counsel can take proactive measures to contain a risk that otherwise knows no bounds,” said the author of the report, Micah Skidmore of Haynes and Boone.
Related: Terrorism and political violence call for review of insurance strategy
Terrorism risk is seasonal, with most attacks occurring during the spring and summer months.(Photo: Shutterstock)
Is terrorism risk insurance coverage necessary?
Terrorism risk can be quantified and, to some extent, understood by its relationship to a variety of constantly evolving factors. Historically, domestic terrorism represented a disproportionate risk to property, relative to bodily harm, spread over numerous smaller incidents.
Most attacks occur on a seasonal basis, especially during the spring and summer months. The report also notes there is a greater likelihood of terrorist attacks in the Northeastern region of the U.S. and the coastal states like California and Texas.
Although property damage and bodily injury are the primary risks associated with terrorism, there are other dimensions companies should consider if they’re looking to minimize their exposure, such as:
Fiduciary liability for corporate directors and officers,
Pollution loss and liability,
Professional (E&O) liability,
Employment practices liability,
Business interruption loss, and
Privacy and network security liability.
Even when a company does not independently recognize terrorism risk sufficient to justify an insurance solution, some form of terrorism coverage may nonetheless be required by contract — including lending agreements.
Traditional policies, including commercial general liability and property policies, may provide some coverage for terrorism risk if not expressly excluded. (Photo: Shutterstock)
What insurance solutions are available to address terrorism risk?
What terrorism insurance solutions are available to corporate risk managers? A significant market capacity exists for domestic terrorism coverage in two different forms: traditional first- and third-party policies, and so-called stand-alone terrorism risk insurance. Traditional policies, including commercial general liability and property policies, may provide some coverage for terrorism risk if not expressly excluded.
Workers’ compensation insurance — a state-regulated line of coverage compulsory in nearly every state — is another traditional policy that may provide some form of terrorism coverage. Unlike other property & casualty policies, workers’ compensation policies do not have terrorism (or war) exclusions.
To the extent that terrorism risk is excluded or unavailable under traditional policies, a corporate policyholder may consider purchasing stand-alone terrorism insurance. Stand-alone terrorism policies, however, provide a wide a variety of terms — some offering broad coverage, others very little.
They also typically exclude political risks, including loss resulting from strikes, riots, civil commotion, rebellion, revolution, war and insurrection. Cyber-related loss and liability, as well as nuclear, biological, chemical and radiological hazards such as anthrax, are also commonly excluded.
Related: Protests, riots, and loss of business income
In a large-scale terrorism event, disputes have developed and may continue to arise over what qualifies as a separate “occurrence.” (Photo: Shutterstock)
What should corporate policyholders look for in placing stand-alone terrorism coverage?
If a stand-alone terrorism policy is the preferred method of addressing terrorism risk, selecting the policy with the best terms involves more than just ensuring that coverage extends beyond “certified acts of terrorism.” Brokers and policyholders should carefully review the valuation terms in stand-alone terrorism policies to ensure that such terms appropriately compensate the insureds for loss and damage, even when actual repair or replacement may not be possible or optimal.
In a large-scale terrorism event, disputes have developed and may continue to arise over what qualifies as a separate “occurrence,” justifying either the application of separate limits or the accrual of a separate deductible or retention. To avoid such controversy and afford a measure of certainty to policyholders and insurers alike, some considerations should be given to including specific terms defining what constitutes an “occurrence” and how the number of occurrences associated with a given claim will be determined.
The “act of terrorism” may, directly or indirectly, prompt a release of hazardous substances. (Photo: Shutterstock)
What other policy terms justify special consideration in a terrorism risk insurance policy?
Expediting expense: The costs incurred to sustain operations or expedite repairs in the wake of a terrorism incident may vary substantially from any other casualty loss. Expansion of insuring terms beyond “reasonable and necessary” costs to include items such as security or healthcare-related expense may be appropriate.
Increased cost of construction: A terrorism incident may itself prompt legislative or other practical requirements that have the effect of increasing the cost of demolition and compliant repair.
Pollution exclusion: The “act of terrorism” may, directly or indirectly, prompt a release of hazardous substances, which increases the cost of the claim. Policies should not exclude the cost associated with a release of “pollutants” that is an indirect result of an otherwise covered “act of terrorism.”
Sue and labor: What is reasonable to protect, recover or save insured property after a general casualty loss may be very different from what is appropriate following as an act of terrorism. To avoid disputes, language in “sue and labor” provisions should be tailored accordingly.
Terrorism risk insurance, whether through traditional or stand-alone policies, is an increasingly important element of domestic corporate insurance programs. To that end, risk managers, agents, brokers and corporate counsel should review corporate exposure to risk, existing policies and contracts to determine whether terrorism risk insurance is necessary to protect the business or fulfill contractual obligations.
Related: Interest in travel insurance terrorism coverage on the rise
Originally published on PropertyCasualty360. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
As terrorism attacks at large-scale music events have unfortunately become more of a tangible threat, artists are beginning to rely on terrorism insurance for their events, according to a new report in The Hollywood Reporter. Just in the past two years, the mass shooting in Las Vegas at the Route 91 Harvest Music Festival, the bombing at Ariana Grande’s show in Manchester, England, and the attack on the Bataclan nightclub in Paris in 2015 have taken innocent lives of people. “Now more than ever they are targets,” says Steves Rodriguez, business manager for Fifth Harmony.
Terrorism insurance has not always been a major concern for artists and their teams. But such policies, known as political violence and terrorism (PVT) insurance policies are becoming more commonplace as artists take their tours to bigger arenas and more cities around the world. In reality, nothing could prepare either the artists, their band, their managers, or concertgoers for the terror of an attack and its repercussions, but insurance policies can help the artist’s bottom line and are therefore becoming much more popular.
“If it’s a big tour and you’re a high-profile artist and you gather tens of thousands of people per show, you have to have it,” says attorney Dina LaPolt, who represents Britney Spears and Steven Tyler.
Even the way the policies are written has been evolving thanks to the increased threat levels. “The way [policies had] been written previously is, the threat had to be related to the venue,” said John Tomlinson, who leads the entertainment group of Lockton Cos., the world’s largest privately held insurance brokerage. “We have expanded that language to include threats made to bandmembers.” Other policies might even include attacks made within days or miles from the concert venue itself.
“Not everybody believes it’s necessary,” Bill Tannenbaum, a business manager who specializes in representing touring artists, told THR. “I’m pretty vocal about taking it with my clients, and luckily we had it with Ariana Grande.”
With that said, it’s not always a straightforward decision. “It’s usually a battle with the artist to buy it,” LaPolt explains. “If you get paid a million dollars, all of your tour costs come out of that million. So every penny counts.”
And it’s not just concerts. Other large-scale live events like NCAA tournaments or trade shows are covered by terrorism insurance. Even those who anticipate a strong backlash to their work, even if it’s mostly behind-the-scenes work and not at live events, are looking to get covered. Jenji Kohan, the creator of Orange Is the New Black, told THR that she has had her office building insured against terrorism because the new show she is working on is about a teenage Jesus and she expects it to be controversial.
“You’re always going to do something that someone doesn’t like,” Kohan said. “And you don’t know how crazy that someone is going to be.”
Due to the recent string of deadly attacks at music events – most recently the shooting that occurred in Las Vegas – more artists are now considering the need for terrorism insurance.
Although political violence and terrorism insurance policies have been around for some time already, they are not usually purchased unless an artist is touring volatile parts of the world, such as South America or Eastern Europe.
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However, recent attacks staged near or within these music events – the Las Vegas shooting, the bombing outside Ariana Grande’s concert in Manchester, England, and the 2015 Bataclan nightclub attack in Paris – have since led representatives to advise celebrities to secure the insurance.
“Not everybody believes it’s necessary,” business manager Bill Tannenbaum told Hollywood Reporter. “I’m pretty vocal about taking it with my clients, and luckily we had it with Ariana Grande.”
Typical nonperformance insurance policies cost roughly 2% of the artist’s guarantee. The policies pay for claims on canceled events and as much as 80% of appearance fees for reasons such as illness, injury, or natural disaster. It would cost about an extra half-percent to add political violence and terrorism insurance.
“It’s usually a battle with the artist to buy it,” stated Dina LaPolt, an attorney who represents Britney Spears and Steven Tyler. “If you get paid a million dollars, all of your tour costs come out of that million. So every penny counts.”
Notably, artists can even file a claim at the mere threat of an attack.
“The way [policies had] been written previously is, the threat had to be related to the venue,” explained John Tomlinson, SVP, head of entertainment at privately held insurance brokerage Lockton Companies. “We have expanded that language to include threats made to bandmembers.”
LaPolt argued that as long as there remains a risk of another attack during a large music event, terrorism insurance is a must.
“If it’s a big tour and you’re a high-profile artist and you gather tens of thousands of people per show, you have to have it,” she said.
There’s been a high demand for terrorism insurance in the wake of the Las Vegas massacre — with artists from all music genres reportedly looking to invest in policies for their concerts.
“Now more than ever they are targets,” explained Steves Rodriguez, business manager for the all-girl pop group, Fifth Harmony.
Speaking to The Hollywood Reporter this week, he and other managers described how musicians were taking out terrorism insurance policies now — more than ever before — following the deadly mass shooting at the Route 91 Harvest festival on Oct. 1.
“Not everybody believes it’s necessary,” said business manager Bill Tannenbaum, who specializes in representing touring artists.
“I’m pretty vocal about taking it with my clients, and luckily we had it with Ariana Grande.”
The “Into You” singer was forced to cancel multiple stops on her world tour back in May after a suicide bomber blew himself up at the Manchester Arena where she was performing. Twenty-two people were killed in the attack and hundreds more injured.
The incident, coupled with the Vegas massacre and similar terror strikes — such as the Bataclan nightclub in Paris during an Eagles of Death Metal concert — has ultimately prompted artists to buy the insurance policies, which up until now, have been viewed by many as being too expensive.
“It’s usually a battle with the artist to buy it,” said Dina LaPolt, lawyer for singers Britney Spears and Steven Tyler.
“If you get paid a million dollars, all of your tour costs come out of that million,” she said. “So every penny counts.”
While standard nonperformance insurance policies typically cost about 2 percent of the artist’s guarantee — and pay a claim of around 80 percent of appearance fees if a concert is canceled — a political violence and terrorism policy will usually run them an extra half-percent more, THR reports.
Once a musician purchases the PVT insurance, they will be able to obtain their claim in the event that an unexpected crisis arises, or if there’s even the threat of an attack.
“The way [policies had] been written previously is, the threat had to be related to the venue,” explained John Tomlinson, head of the world’s largest privately owned, independent insurance brokerage firm, Lockton Companies.
“We have expanded that language to include threats made to bandmembers.”
In addition, terrorism insurance policies may also cover a concert or show that is affected by an attack or threat that takes place around the same time or within a 50-mile radius of the venue.
“If it’s a big tour and you’re a high-profile artist and you gather tens of thousands of people per show, you have to have it,” LaPolt said.
“Orange Is the New Black” creator Jenji Kohan, who recently took out a terror policy on her office building, added: “You’re always going to do something that someone doesn’t like…And you don’t know how crazy that someone is going to be.”
The hot new thing on the concert circuit? Terror insurance.
In the wake of attacks on the Bataclan theater in Paris, the Manchester Arena and, earlier this month, an outdoor Las Vegas music festival. artist managers and lawyers insist that their clients will increasingly seek to be indemnified agianst terrorism.
“If it’s a big tour and you’re a high-profile artist and you gather tens of thousands of people per show, you have to have it,” attorney Dina LaPolt, who represents the likes of Britney Spears and Steven Tyler, told the Hollywood Reporter.
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Bill Tannenbaum, a business manager who represents Ariana Grande, said the singer “luckily” had purchased terrorism insurance before the suicide bombing at her May concert in Manchester, which killed 22 people. In its aftermath, Grande canceled subsequent shows in London, Belgium, Poland and Germany.
Terrorism insurance has been around for decades, but most artists didn’t think to buy it unless they were performing in a particularly “volatile region.” In the past, these “volatile regions” didn’t typically include the United States.
As artists weigh the threat they — and their fans — face just by stepping on stage, companies like MGM Resorts International, which owns the Las Vegas Mandalay Bay Resort and Casino, have considered whether they should purchase “active shooter insurance.” After the Las Vegas shooter, from his perch on the 32nd floor, MGM’s share price plummeted.
“Any one single incident is a tragedy. But compare that to the number of possibilities, the millions of events that could occur,” University of Connecticut School of Law professor Peter Kochenburger told Newsweek on Friday. “If you could sell shark bite insurance, you could probably make a lot of money.”
What Kochenburger suggests is that insurance companies peddling active shooter or terrorism insurance policies could easily capitalize on fear without ever having to pay out any claims. Mass shootings continue to rise in their severity, but they aren’t rising in frequency.
Still, there’s no telling how many artists could succumb to their fears of mass shootings, which a recent study shows four in 10 Americans share. Terrorism insurance brokers are even changing their policies to accommodate artists and the potential threat levels they face.
“The way [policies had] been written previously is, the threat had to be related to the venue,” John Tomlinson, who heads Lockton Cos., an insurance brokerage, told the Reporter. “We have expanded that language to include threats made to bandmembers.”