July 26, 2004 by Canadian Underwriter
The event cancellation insurance market which took a roller-coaster ride after 9/11 is leveling off, according to a new report from international broker Willis.
The study says premiums and terms in the event cancellation market are stabilizing despite ongoing turmoil in the Middle East and the continued instances of global terrorism events. Event cancellation insurance spiked after the 9/11 terrorist attacks, with market difficulties reaching a head when coverage for the 2002 World Cup of soccer was cancelled and organizers were forced to seek new coverage amounting to the expensive event cancellation coverage ever purchased. FIFA, which organizes the tournament, has since successfully sued the insurer who cancelled its coverage.
Also following 9/11, Willis notes, policy periods were shortened from the traditional multi-year deals to 12-month maximum as a rule. With the stabilization of this line, carriers are now providing from US$150-$250 million in capacity, and two and three-year policies are again being offered.
Pricing has leveled off, with premiums in the first half of this year unchanged or even reduced from 2003 levels. The terrorism component of the coverage has similarly flattened, however, Willis says terrorism coverage for event cancellation is being priced according to time and distance from potential terrorist targets. Events in the highest risk group major cities such as New York and Washington are paying as much as 30% more than the second tier of exposure, which includes less high profile cities like Chicago and Las Vegas. A third tier of risk includes smaller cities such as Orlando which have sites of some significance.