How is Covid-19 impacting Hong Kong’s event market?February 19 2020 by Yvonne Lau
With much of Greater China at a standstill due to the novel coronavirus (Covid-19) outbreak, Hong Kong has seen a wave of event cancellations and postponements related to business, entertainment and sporting events.
Art Basel, a premier Swiss art fair by MCH Group (MCH) attended by around 80,000 people, was slated to return in March this year, but has been cancelled leading to lost art sales and delegate revenue. MCH, the organisers, cited health and safety concerns and significant logistical challenges stemming from Covid-19 – and have subsequently filed for an insurance claim which could be complex, according to an Artnet report.
“In the absence of a global outbreak, the [communicable disease] cover is easily accessible. The problem is that customers do not normally ask for the extension.” Tommy Elliot, Circles Group
The organisers of the Hong Kong Sevens – the World Rugby and Hong Kong Rugby Union – have decided to postpone the tournament to October this year. It will be the first time since the tournament’s 1976 inauguration that the match will take place outside of March and April. It even went ahead during the 2003 Sars crisis.
The timing of the Covid-19 outbreak is particularly difficult for Hong Kong as it follows quickly from the anti-government protests which spurred the cancellation of music festival Clockenflap last November.
Event insurance in Hong Kong is not uncommon – the city holds many varied commercial events throughout the year, and major insurers offer customised coverage. Policies protect against weather and natural perils, terrorism and communicable disease.
The Covid-19 outbreak is an example of a communicable disease outbreak – however, event insurance generally excludes this type of risk and there is low demand for it. Once a virus becomes public then the market is quick to exclude that specific disease. Globally, insurers are rushing to exclude the Covid-19 epidemic from their policies, says a Reuters report, and businesses looking to purchase event cancellation insurance around the world will be unable to get cover.
“This reduction of capital into the contingency market, combined with the large loses experienced in the past few years, will unfortunately see contingency rates rise in 2020 and beyond.” Simon Calabrese, Marsh
Simon Calabrese from Marsh’s entertainment and leisure team told InsuranceAsia News (IAN) that while contingency policies generally exclude communicable disease as standard, clients can elect to buy-back this cover at an additional premium, provided it is not a known risk.
Michael Lamb, a director at Hong Kong broker CCW Global, said to IAN: “While such coverage is available from underwriters on a case-by-case basis (at their discretion and for an increased premium), the number of clients asking for this protection is extremely low. To this point, communicable disease haven’t been a concern with regards to contingency insurance.”
Tommy Elliot, Asia Pacific regional director at Circles Group, a specialty MGA, said that there are more ongoing claims as a result of Covid-19.
He noted: “While [we] cannot comment on specific cases, we are actively working on claims for our regional clients. We are also aware of a number of events recently cancelled or postponed that would certainly have coverage for communicable disease – in order to obtain coverage, event organisers would have needed to purchase it well in advance of their event.”
Elliot added: “In the absence of a global outbreak, the cover is easily accessible. The problem is that customers do not normally ask for the extension, and when it is offered, it tends to be one of the first things crossed off the list to save costs.”
Should an outbreak of communicable disease occur and the policyholder has this type of coverage, “each policy is tailored to client needs and every claim will have unique circumstances,” according to Marsh’s spokesperson.
The future may see a heightened demand and availability for this type of protection, says Lamb, following the cessation of the current situation when underwriters are able to reassess the risks involved in future outbreaks.
It could also lead to some rate hardening.
Calabrese added: “The Covid-19 outbreak is further contributing to the losses impacted within the global contingency insurance market. Whilst Hong Kong has had its [recent challenges], globally over the past few years, there have also been some major [event] and festival cancellations in Australia, Europe and the US. As a result, we have seen the number of contingency insurers reduce over the past three years. This reduction of capital into the contingency market, combined with the large loses experienced in the past few years, will unfortunately see contingency rates rise in 2020 and beyond.”
It has been a tough business environment for brokers and market players for the last six months.
Lamb commented: “While the coming months will be just as difficult, we would expect to see a return to normal in the long run. Insurance is a robust product and its nature means that it is fairly protected from social, political and financial events – incidents of this type will normally spur demand for increased consumption following the ending of the events in question.”
Despite a tumultuous 2019 due to protests, and the turbulent start to 2020 due to Covid-19, market players in the city remain optimistic for the road ahead and agree that the environment will soon return to normal, with a caveat that contingency rates may rise.
Elliot added: “The good news is that the current outbreak will subside and there has been positive messaging from the government to support industry activity once we get through this tough period.”
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