The Hollywood writers’ strike could cost the entertainment industry up to $8 billion (£6.2 billion), according to an insurance expert, and it won’t be insurers that foot the bill.
“Losses from the 2007 to 2008 strike were around $2 billion,” said Ross Garner (pictured below), managing director-property & casualty at NFP. “With the amount of new streaming services that have popped up since then, which has led to an increase in productions, losses this time around could be around $8 billion, which would put it up there with major natural disasters, hurricanes and things like that.”
One of the downsides of major strikes is that there is very little to nothing that can be done for clients to mitigate the impact from an insurance perspective.
“There is no insurance product for events like this,” Garner said.
One of the reasons for this is that strikes are seen as an inevitable occurrence that should be considered when working in the entertainment industry.
There is also ambiguity around how long this blackout period will persist for, which would make writing coverage much more difficult and cost prohibitive.
“I couldn’t even imagine how an insurance product would be helpful in this situation, since the premiums would be astronomical,” Garner said.
Coverage like this would be hyper specific, which means that only few key businesses would be able to write a policy for situations like this.
Furthermore, while strikes do not happen on a consistent basis, the sheer amount of loss that is attributed to them can be vast.
However, there is insurance coverage for third party strikes that lead to a business disruption, such as having to rebook flights due to an aviation shut down that prevented a film crew from travelling to a foreign country for a union production.
“In this circumstance, the business disruption is widespread and much harder to rectify from a claims perspective,” Garner said.
While Hollywood has experienced production halts in the past, notably during the 2007 to 2008 writers’ strike, the ongoing action that started in April is even more complicated due to it coming after a pandemic that shook the industry to its core.
“Businesses, especially independent contractors providing equipment and other services to film and television productions, blew through their financial reserves while the world came to a standstill during the pandemic,” said Ross Garner, managing director-property & casualty at NFP.
“Now, they are once again in a position where they can’t work and may be close to running out of funds once again, if they were able to recoup their losses during lockdowns.”
The first piece of advice US brokers can give to a client working as a contractor in the entertainment industry is to always have a cash reserve.
“Especially after COVID, unforeseen circumstances are a big threat,” Garner said. “In between strikes and a pandemic, I would definitely bring up a rainy day fund as an integral investment.”
On Week 10 of the writers strike, co-chair of the WGA negotiating committee, David Goodman, says there is no movement towards resolution. “The companies have to make the move.” https://t.co/Lfmz7YUCey pic.twitter.com/D722HpGqPh— Variety (@Variety) July 7, 2023
Beyond establishing robust savings, talking to a client and explaining the particularities of their broader coverage is extremely important in a situation like this.
This is particularly key for companies that have a costly inventory of equipment that may not usually be stashed in one place when things are business-as-usual.
“When these businesses are in production, a vast majority of their equipment is out for use on sets,” Garner said. “When a strike occurs and contracts freeze up, all of that expensive technology and machinery is just sitting in one place, which makes a more catastrophic loss imminently possible.”
Whether falling victim to a warehouse fire or theft, the amount of inventory that can be affected by a loss increases substantially.
It is of utmost importance for a broker to speak with a policyholder about how the chances of incurring a larger than usual claim is now a more pronounced threat.
“Now is a perfect time to look over the terms of a policy to make sure that it includes the updated risk profile that is associated with business disruption,” Garner said.
“This is especially true for more niche forms of coverage related to the entertainment industry, and having that specialized broker be able to assess all the variables of a potential loss scenario and safeguard a client from more economic hardship.”