o What would happen if a major award show, such as the Oscars, were to be cancelled by a labor dispute, such as the recent writers' strike in Hollywood?

Despite the seeming complexity involved in special events for insurers, those in the industry who handle these risks agree there is ample profit to be made, as long as the underwriting is sound. In addition, the turnaround for a quote is actually fairly quick in most cases, they say--many times within 24 hours.

Additionally, because it is a specialized risk, it is not heavily influenced by the pricing ebbs and flows that define the general insurance cycle.

Ultimately, every event is different, and for insurers, success in this market essentially comes down to carrier-specific decisions on comfort level.

The term "special events," after all, is "such a large arena" in the insurance world, according to Eric Taylor, vice president of underwriting for Richmond, Va.-based James River Insurance Company, an excess and surplus lines carrier that writes larger, interactive events such as auto shows, concerts and large street festivals.

Mr. Taylor noted there are some niche carriers that will only write small events, such as weddings, social gatherings and seminars. Other carriers may focus on concerts, for example, while still others might zero in on larger special events.

The nature of the event will also determine the coverages desired by clients. General liability is an obvious need for any event, but beyond that, experts agree that coverages offered or requested vary from event to event.

For example, a key question to consider is whether the event is being held outdoors.

If so, weather insurance is a good idea, according to Don Kasper, manager of the Denver office of Burns & Wilcox, a managing general agency that places coverage for smaller events (such as family reunions) as well as larger events (like concerts, rodeos), and sometimes even mega-events, such as the X Games.

Mr. Kasper said weather insurance can protect not only against an event being cancelled due to inclement weather, but also for reduced attendance.

EYE ON THE PRIZE

When an event features a prize offered to a contestant who can accomplish an unlikely feat, "hole-in-one" coverage should be considered, according to Bob Greenebaum, executive vice president and casualty practice group leader of wholesale brokerage Swett & Crawford. "If you're offering a cash prize, or a car, or some prize for someone in an event getting a hole in one, you can take out insurance in case someone's lucky enough to get that."

A typical exclusion for this coverage, Mr. Greenebaum noted, would be for a participant who is a professional. For example, the company would not cover the contest if Tiger Woods participated and made a hole in one.

Swett & Crawford writes events including conventions, charity functions, corporate and promotional events.

The prize coverage, said Mr. Greenebaum, is generally cheap because winning the contest is a statistical unlikelihood. "It's just one of those things that doesn't happen very often, and so I don't think it's very expensive to obtain," he said, noting that coverage for a prize such as a car could be obtained for around $300.

If an event involves serving alcohol, then liquor liability will also be a concern, and Mr. Greenebaum said most companies will write host liquor liability. This coverage protects those who are not in the business of selling alcohol, but instead only provide such liquor service occasionally as the sponsor of an event.

Corporations planning an employee outing, for instance, could either have coverage under their existing corporate program, or they can obtain coverage specifically for the outing, he said.

EVENT CANCELLED

Sometimes, no matter how careful the planning, circumstances arise that prevent the successful execution of an event. Event cancellation coverage can protect clients should this situation arise.

Mr. Kasper described this coverage as an "all-cause" coverage, "which means as long as the cause of your event being cancelled, abandoned, postponed, curtailed or relocated is beyond your control and not excluded, you're covered for it. It's a true all-risk policy form."

Although it would seem to be an obvious coverage choice for clients, Mr. Taylor said there is actually a lack of demand, and James River Insurance does not offer event cancellation for that reason.

"We don't get a lot of requests for event cancellation, and we would not do that anyway," he said. "I find that a lot of people shop for that, but nobody wants to buy it when it comes to actually purchasing it."

Mr. Taylor added that "everybody wants a price; everybody gets a price, and then they never buy it. It's a tough close."

Speaking to why clients choose to go without event cancellation, Mr. Taylor said that "it just comes down to the economics of the event. They try to go without it." The bigger the event, he noted, the more likely that a client will try to secure the coverage.

For those who choose to purchase it, Mr. Kasper said event cancellation covers circumstances such as severe adverse weather, venue availability, earthquakes, wildfires, power blackouts, communicable diseases, major riots and civil commotion, national mourning, and possibly even terrorism and labor strikes.

With a labor strike, Mr. Greenebaum noted, underwriters will want to take a look at the relationship between labor and management before deciding whether to include that coverage.

Using the example of the recent writers' strike in Hollywood possibly affecting the ability to hold an award show, for instance, Mr. Greenebaum said that "one of the problems with underwriting events like that is that what [carriers] will exclude from coverage are 'known conditions.' Insurance is for the unknown rather than the known."

He added, "You actually could, I think, insure an event for cancellation due to something like the writers' strike, but they'd want to have a really good handle on the labor situation. If there are any [ongoing] disputes, or any unrest at all that goes on, you're not going to find coverage for that because the odds of [a strike] happening are significantly enhanced."

Timing also matters, Mr. Greenebaum said. "We always use an analogy in the business of trying to insure a building for fire when there's smoke coming out of the second floor."

"If you know there's a labor dispute going on, you're probably not going to provide strike insurance as a peril to insure against," he added.

Event cancellation also protects against the non-appearance of a keynote speaker or entertainer. Mr. Greenebaum said that, when underwriting this risk, carriers will look at the track record of the performers. "Do they typically show up when they're asked to show up?"

He referenced a situation that happened around 25 years ago where the late Luciano Pavarotti was supposed to do a charity performance. "He apparently had a record of not showing up very often, so it was a very expensive undertaking, and the [event-holders] opted not to pay for the insurance because the underwriters viewed it as a hit-or-miss kind of thing. His [odds of] non-appearance were about 50 percent."

Mr. Greenebaum said, "I was not an opera fan, so I was not aware of his propensity to not appear."

SOUND UNDERWRITING

Offering any type of special-event coverage requires sound underwriting, and while determining the risk factors of events that involve a massive gathering of people may seem like a daunting challenge, those in the industry said that it is actually similar to writing any other line of insurance.

Mr. Kasper at Burns & Wilcox, said that questions underwriters will ask include:

o Is this an event that's been done before?

o Do the people sponsoring the event have experience, and some kind of track record?

o Where is the venue?

o What's the exposure to the public?

Insurers generally consider events such as a family reunion or wedding as "benign," Mr. Kasper said.

"The big issue there becomes liquor liability and what's the exposure around that," he noted, adding that for other events, carriers will use waivers and warranties to limit exposure and mitigate claims activity.

For most events, Mr. Kasper said he can get quotes quickly. "Generally, if it is a standard event like a concert or a beer festival, or something along those lines, we can turn those around within 24 hours."

Unique events can take a little longer, Mr. Kasper said. "Not a great deal of time, but maybe several days, perhaps, to get done."

Mr. Taylor said his carrier considers the following when underwriting a special event risk:

o The activity

o The controls that are in place

o The types of people attracted to a given event

o The hours of operation

o Whether or not alcohol is served

Knowing who is responsible for what with respect to the event is also important, he said--noting, for example, that if staging and lighting have been set up, he will look into the subcontractors responsible for that.

"I think as underwriters we have to look at the contractual liability obligations for some of the major exposures," he said. "For instance, if you're doing an event, and you have some carnival rides coming in, as underwriters we have to see which way the arrow points on things like that."

With sound underwriting, companies can accurately determine what types of risks they want to write, and which ones they want to stay away from, experts say.

Speaking to the latter point, Mr. Kasper said he has seen carriers express concern over events centered on the equine business, such as rodeos, stampedes and cattle drives.

"You're dealing with horses, and they can be spooked for whatever reason," Mr. Kasper explained, noting that with such an unknown, some carriers are content to pass.

Promotional events, such as ones held by radio stations, can get a little risky as well from an insurer's standpoint, according to Mr. Greenebaum.

"You'll see radio stations do promotional events where they might have a daredevil act, or an unusual kind of event where the greatest risk may be to not only the participant, but to the spectators."

He cited the example of someone like the late Evel Knieval, jumping over cars on a motorcycle, noting that the host of the event is responsible not only for the daredevil, but for the people watching. "So that is obviously a higher risk to undertake," said Mr. Greenebaum.

High-flying stunts, however, are not the only risk factor that can give a carrier pause. Mr. Taylor said that James River Insurance tends to avoid the small and very local events due to competitive reasons.

"The ones that we stay away from are the real small ones--the local blueberry festival--because there's just too much competition and it's just a very crowded market," he said, noting that he would be willing to write such an event depending on the level of competition.

Sometimes professionals in this market will see some unique events they want to insure, but may take a little extra time to properly underwrite. For example, Mr. Greenebaum spoke about a radio promotion that a colleague of his wrote a few years ago.

"This family of acrobats did a high-wire act across the Chicago River," he explained. "That was an unusual one for sure."

Describing the underwriting process that must have taken place, Mr. Greenebaum said that "if you were going to put yourself in the insurer's shoes to do that, you'd want to make sure that safety issues were all taken care of, of course. If one of the performers fell into the water, is there a rescue crew close by? Are the spectators kept at an appropriate distance? Are they able to swim?"

"They're fairly logical questions that get asked to understand the risk," he added.

Mr. Kasper said he is working on a risk that is a new concept being done in Europe. "It's called Dinner in the Sky," he said. "There is a dining room platform that is dangled from the end of a crane. You can board on the ground and they lift you up in the air several hundred feet, and you have dinner in the sky."

"It's something we've never seen before, and from what we've been told, has not been done before," he added. (To see the concept in action, go to www.dinnerinthesky.com.)

"Something like that...takes a fair amount of explanation in terms of what the process is, what the equipment is, and really some basic engineering data and trying to develop what the parameters of its use are," he explained. "For instance, at what wind speed do you not go up in the air with something like that?"

As for market conditions, the brokers and insurers who participate the special-event niche say the market is healthy overall.

The business is mostly written through excess and surplus lines carriers, but admitted carriers will write some of the business as well, they say.

"Generally it's a very easy market," Mr. Kasper said. "Carriers for the most part like to do this business. They say it's generally very claims-free. It's also very finite in time, for the most part. Most of these events only last a day, to a few days, to a week."

Mr. Taylor said there are a lot of carriers writing coverage for events, but they do not all necessarily compete for the same type of events. "They all have their own set of appetites, and there are fewer and fewer as the breadth of activity gets larger," he said.

The professionals agreed that pricing tends to be written according to risk rather than in response to overall market cycles. "Usually pricing has stayed in a pretty tight band for this business," said Mr. Taylor.

"I think [prices] generally remain a little bit flatter," according to Mr. Kasper. "We don't see great swings in premium [and] we don't see a lot of new entrants into the marketplace on a regular basis. Terms, conditions, and pricing for the most part remain pretty steady."

Swett & Crawford's Mr. Greenebaum agreed. "I would say that it is less prone to market conditions than other coverages because it is specialized," he said, although he was quick to qualify that statement.

"Having said that, you see people doing some pretty crazy things in this marketplace, so it may, in fact, have some sway," he said.