Michael Jackson’s untimely death, barely two weeks before he was to begin a long awaited series of 50 concerts stretching over eight months, has been the world’s top story. It’s also a story in London, where rumors, announcements, speculation and a great deal of silence sums up current knowledge about what, if any, event cancellation coverage may be involved.
Other than Jackson, who had hoped the tour would revive his flagging career and help repay an estimated $400 million in debts, the biggest loser so far seems to be AEG Live, the Los Angeles-based promoter of the concerts, which is part of billionaire Philip Anschutz’s empire. According to an article from the Associated Press, it stood to collect about 5 percent to 10 percent of the gross ticket revenue of $90 million to $100 million, plus as much as $15 million from concession and merchandise sales. AEG also owns the O2 Arena in East London where the concerts were scheduled.
Jackson’s fans worldwide had already purchased an estimated $90 million in tickets. A number of companies who sold them, starting with AEG, but also including eBay, Seatwave, Lastminute.com and viagogo, are now faced with refunding the money. Most of them have said they intend to do so as quickly as possible. AEG is also facing 50 empty nights at London’s premier concert venue, which will be difficult, if not impossible, to replace.
There will be an impact on the London insurance community, as there is some event cancellation coverage. The question is how much, and who were the brokers and underwriters that participated. So far this remains unclear.
Although Lloyd’s of London hasn’t made an official statement, it has acknowledged that several of its Syndicates did write coverage for the Jackson tour. However, event cancellation insurance is highly specialized. A number of commentators, including Chris Rackliffe, an underwriter at Beazley, cited in the AP article, have noted that few, if any, insurers would have been prepared to take on the risk of an artist with Jackson’s problems. “His prior history, the fact of his health and the difficulties he has had in his life over the last few years means that, from our point of view, he would have been very high risk,” he said.
Lloyd’s spokesman Bart Nash did confirm Syndicate coverage, but declined to give any figures, indicating only that the losses would not be “significant.” Event cancellation policies typically cover the costs of cancelling the events, including promotional expenses, outlays for decoration, sets, equipment, etc. They can also cover loss of estimated earnings from the cancelled event.
However, first one has to get the coverage; then write the policy, which may be subject to a number of exclusions. London’s Insurance Insider, usually a reliable source, especially for Lloyd’s, has said that there was coverage for only three out of the 50 concerts, and that the probable loss for the London market is around £14.5 million ($24 million). Other estimates have indicated that there may be coverage for 10 of the events. No one has said that all 50 events were covered.
The Insider also said that the lead insurer was Lloyd’s Talbot Underwriting Syndicate, a unit of U.S. reinsurer Validus, which responded immediately with a denial. “Talbot Holdings Ltd. has limited potential exposure to any contingency loss arising from the untimely death of Michael Jackson,” said the bulletin. “The company announced … that despite press reports to the contrary, Talbot is not the lead underwriter on the Lloyd’s placement and has a maximum net exposure of less than U.S. $3 million, net of reinsurance recoveries and reinstatement costs.”
It would help if the lead insurer were to step forward. However, as they are under a duty to disclose accurately and completely what their potential exposure might be, they are understandably reluctant to go public with any information, until they can give a complete picture of the liabilities involved and the potential losses. As Lloyd’s is a subscription market, there are probably a number of Syndicates involved, and each one of them is undoubtedly busy – like Talbot – trying to figure out how much they might owe and to whom, and what amounts, if any, are covered by reinsurance. The process could take months.
The vote by the shareholders of IPC Holdings on June 12 was decisive. Seventy-two percent rejected the offer from Max Capital Group to amalgamate the two companies. The consequences came quickly.
Max Capital threw in the towel and announced that it “has terminated the Agreement and Plan of Amalgamation previously entered into among Max, IPC Holdings Ltd. and IPC Ltd. on March 1, 2009,” pursuant to the agreement.
That left the door open for IPC to accept the rival offer from Validus Holdings, which had been repeatedly rejected by IPC’s Board of Directors in favor of the Max Cap deal. As IPC’s shareholders (94 percent are institutional investors and private equity funds) seem to be at odds with the directors, the situation is somewhat confusing.
Validus made it perfectly clear that it was in no mood to compromise. The company issued a statement bluntly declaring that it would “seek to replace the Board of Directors of IPC Holdings,” if it is unable to reach an agreement with the IPC Board in a timely fashion. It also said its offer remains on the table.
However, IPC’s directors seem to be in no hurry to conclude a shotgun wedding with Validus. According to a Reuters report, although the directors have held talks with Validus, they are also soliciting bids from other companies, and they remain opposed to Validus’ offer, as being too low.
Standard & Poor’s gave Max Cap a vote of confidence – taking it off credit watch, affirming its “BBB-” ratings, but with a positive outlook, indicating that they could be raised in the future.
However, S&P put its “BBB” counterparty credit rating on IPC Holdings on CreditWatch with negative implications, and also placed its “A-” counterparty credit and financial strength ratings on IPCRe Ltd. and its “A-” financial strength rating on IPCRe Europe Ltd. – IPC’s main operating subsidiaries – on CreditWatch negative, due, the rating agency said, to the “confused situation.”
Cause of Airbus A330 – Flight 447 crash remains unknown. Although French and Brazilian investigators have recovered 50 bodies and more than 400 pieces from the jet that crashed in the Atlantic at the beginning of June, no conclusions have yet been reached as to the cause of the crash.
Paul-Louis Arslanian, head of the French air accident investigation agency BEA, remained hopeful that additional information would be gathered. But a short-lived report that the black boxes, or flight data recorders, had been located was quickly denied by transport ministry officials.
Air France has taken the initiative to begin compensating the families of the 228 victims of the crash. The company announced that an initial payment of U.S. $24,640 was being arranged through its legal representatives.
The company also said that all its flights using long-haul Airbus jets will be equipped immediately with new speed sensors after the disaster. The pitot tubes that gauge an aircraft’s speed have become the focus of an investigation into the crash after messages showed they might have provided inconsistent data to the pilots. An improved version is being installed on all of the Airbus A300 series.
The Federation of European Risk Management Associations (FERMA) has elected Peter den Dekker, corporate insurance risk manager at Dutch multi-national Stork, as its new president. He takes over from Marie-Gemma Dequae, whose mandate came to an end after four years.
Den Dekker worked as a broker and underwriter in the industrial insurance market before becoming group insurance risk manager at the Dutch multinational Hagemeyer in 1999. He joined Stork, one of the Netherlands oldest companies, in 2006.
FERMA also elected to the board Michel Dennery, deputy chief risk officer of GDF Suez, from the French risk management association AMRAE. Stefan Sigulla of the German association DVS and Paul Taylor of the U.K. association AIRMIC continue as FERMA’s vice-presidents for 2009-2010.
FERMA is made up of the national risk management associations of 16 countries. It represents more than 5,000 members.
Topics USA Excess Surplus Aviation London Lloyd's Risk Management
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