In today’s unpredictable environment, cancellation insurance has become more widely used as a risk management tool. Cancellation insurance for events can either include policies protecting the rights holder or policies that protect spectators/consumers.
In general, insurance safeguards against major financial losses caused by a type of unforeseen circumstance. It protects the entity against lost revenues and irrecoverable expenses that would otherwise be lost by a cancellation.
Global Market Statistics, an India-based organization, reported the industry valuation in 2024 for “cancel for any reason” insurance was $9,896 million and expected to grow to a minimum of $13,244 million by 2033. If that report is reliable, it provides a key piece of information: the cancellation insurance industry is growing rapidly.
With industry growth, it is becoming increasingly apparent that cancellation insurance is no longer just a risk protection measure but a standard component of the event management business.
Much of this growth in third parties offering cancellation insurance can be attributed to the heightened risk awareness following the COVID-19 pandemic in addition to the increasing frequency of extreme weather conditions. Broader economic conditions have contributed to the rising cost of cancellation insurance which has maintained or exceeded the pace of the general increase in the cost of products and services.
Spectators typically can opt in or out of cancellation insurance when purchasing a ticket for an event such as a concert or even an NFL game. Also known as ticket insurance, this product makes the seller (such as StubHub or the NFL) responsible for offering cancellation insurance; it is also incumbent upon that entity to identify the conditions for reimbursement.
When travel packages are purchased for events such as the Olympics, World Cup or a college football game played overseas, cancellation insurance may be offered by the seller (e.g., specialty tour companies) who may or may not contract through the rights holder or a third-party agency.
To individuals traveling a distance to an event, airlines offer consumers the option to insure their flight against cancellation due to any circumstance (“cancel for any reason”) including a personal decision.
In addition, based on age and offered at a daily rate, the consumer has the option to shop third parties; these might include companies like Nationwide, Wells Fargo or AAA) to purchase either general comprehensive travel insurance, travel medical insurance or a specialized rider policy covering hazardous “adventure” sports.
While cancellation insurance can be looked upon as almost mandatory in today’s environment, the rights holder still has the option to purchase or refuse cancellation insurance to cover the cost of production and the potential gross revenues that would have been amassed if an event were not cancelled.
Organizers may opt out of cancellation insurance, for example, if their event is relatively small (such as might be the case with private parties or small community festivals) and in other cases where the potential losses are low. Most event organizers with business acumen, however, will carry some type of minimal cancellation insurance.
The following are seven steps for rights holders and event organizers to follow organizers when choosing to purchase cancellation insurance.
1. Assess Risks
As indicated, if an event is small and there is little to no risk of the event being cancelled due to an unforeseen circumstance, organizers may decide against securing cancellation insurance; however, it is imperative to understand that the conditions that could lead to a potential cancellation can present suddenly and without warning.
Organizers in all cases should consider all potential risks to cancelling the event (e.g., no-shows, weather, issues with the venue, etc.) and determine the potential financial consequences in addition to the impact on safety of attendees.
2. Determine Coverage Needs
Once organizers decide that cancellation insurance is a necessity, the next step is to determine the type of coverage. Broad insurance coverage includes “cancel for any reason” and runs the gamut for potential disruptions. Other types of insurance may parcel out inclusionary reasons such as a no-show or an act of terrorism or civil unrest. In these cases, event owners should consider the menu approach.
3. Calculate Value of Potential Loss
Itemizing a calculation of the minimum and maximum financial losses if an event were cancelled is the next step to purchasing insurance. Organizers should review potential losses in registration fees, ticket sales, vendor contracts, broadcast rights, parking, concessions, merchandise and any other revenue producing areas.
4. Research Specialist Providers
There is an increasing number of third-party agencies and brokers offering cancellation insurance. Event organizers must do their due diligence to weed through the forest to find a reputable vendor. The key to finding a reputable company is to read reviews, confirm that the agency can meet the specific needs of the event and ensure it has extensive industry experience.
Sourcing recommendations and referrals from colleagues can be an enormously helpful means to assist in narrowing a crowded field. Be sure to check online reviews as well as organizations such as the Better Business Bureau. A.M. Best also provides credit ratings and reports for insurance companies.
5. Review Terms and Conditions
The organizer has a choice in the type of cancellation insurance to purchase. Policies are usually offered in tiers (e.g., basic and premium) whereby the purchaser can select the amount of coverage for validated circumstances such as extreme weather, civil unrest, venue issues, absence of featured talent or labor disputes.
There are typically options for the organizer to choose the amount of the deductible they wish to incur in the event of a cancellation in addition to the coverage amount. The rate of the insurance premium fluctuates based on menu selections. Additionally, the consumer should review the policy exclusions such as failure to compensate if the event were cancelled due to a communicable disease or government actions or if a limitation is tied to a geographic area (e.g., flood zones).
6. Compare Vendors
It is prudent to obtain and review multiple quotes for a comparison of prices and coverage. The event organizer must balance costs with the risk tolerance and benefits to aid in a final selection of the appropriate insurance provider. A comparison should consider the reputation and reliability of each business, coverage options, policy terms, exclusions, cost, perceived value, claims process and the degree of customer support and communication.
7. Select Vendor
Once satisfied with conditions of a particular vendor, an event organizer or rights holder will enter into a policy agreement, sign necessary documents and pay an invoice.
By being diligent in following a process before selecting a vendor and choosing a provider early in the planning stages, event organizers and rights holders will be better able to budget accordingly and have peace of mind knowing that potential disruptions will be managed effectively. SDM
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