A government-backed reinsurance scheme designed to support the live events sector following the COVID-19 pandemic had a limited effect on stimulating additional activity, according to an independent evaluation commissioned by the Department for Culture, Media and Sport (DCMS).
The evaluation, completed in June 2023 and published last month, assessed the impact of the Live Events Reinsurance Scheme, which was introduced to address market failures in event cancellation coverage during the pandemic.
The live events industry was significantly affected by lockdown restrictions in 2020 and 2021, with event organizers facing uncertainty over potential cancellations due to evolving public health measures.
Although social distancing restrictions were lifted in summer 2021, insurers had largely withdrawn coverage for COVID-19-related cancellations, leaving event organizers unable to secure protection against financial losses.
In response, the UK government launched the Live Events Reinsurance Scheme in September 2021, three months after the removal of legal restrictions on the sector. The scheme, designed in collaboration with HM Treasury, provided reinsurance to private insurers, covering costs if events were legally unable to proceed due to renewed COVID-19 restrictions.
The live events industry, encompassing music festivals, conferences, and business events, significantly contributes to the UK's economy, generating over £70 billion annually and supporting more than 700,000 jobs.
The COVID-19 pandemic severely impacted this sector, with many events canceled or postponed due to health restrictions. A major challenge faced by event organizers was the lack of insurance coverage for cancellations related to COVID-19, making it financially risky to plan future events.
According to the evaluation, the scheme secured participation from more than half of the major insurers offering event cancellation coverage. The total coverage capacity negotiated with insurers amounted to £800 million.
However, uptake was lower than expected, with only 169 events covered under 87 policies over the scheme’s duration, insuring a total of £117.4 million in costs.
No new policies were bound after May 2022, suggesting that demand for the scheme had diminished. Only one claim was submitted and settled, related to a venue being requisitioned for COVID-19 vaccinations.
The scheme generated £5.9 million in income for the UK government through premiums paid by event organizers, resulting in a net surplus that was primarily used to fund the administration of the program.
The evaluation found that the scheme was structured in a way that minimized taxpayer exposure to risk. The "bolt-on" design allowed for targeted risk management while maintaining risk-sharing agreements with the private insurance market. This structure aligned with industry practices and ensured insurers retained responsibility for certain risks.
Although the scheme generated revenue, most of it was used for operational expenses. The report noted that increasing insurers' share of risk could have improved value for money but may have discouraged participation, threatening the viability of the scheme.
The administration of the scheme was described as efficient, with its implementation completed within five months despite the absence of an established framework for such an initiative. While some areas for streamlining the application process were identified, the report acknowledged that government-funded programs require a degree of oversight.
The overall impact of the scheme on increasing activity in the live events sector was found to be limited. The evaluation concluded that its introduction came too late, arriving three months after restrictions were lifted, and that the scope of coverage was too narrow to significantly alter market conditions.
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