The floundering economy and extreme scrutiny of business frivolities has hurt the event coverage class as companies scale down the events they put on or cut back on events altogether. Event producers and non-profits have been hit particularly hard by the slowdown, according to underwriters, which has hurt insurance agencies that focus on this niche.

"If these companies that specialize in this coverage write fewer and fewer events, they will have to make up for the loss of business another way," says Phil Wightman, chief executive officer of Steelbridge Insurance Agency in Santa Cruz, Calif.

Steelbridge writes events of all kinds, including festivals, concerts, and theater events, but specializes in non-profit events. Wightman says that nonprofits count on the money made from their yearly events to keep their organization running so the reduced income is hurting them, as well as the event producers who put on these events.

"If this goes on another year or two will see a lot of events fall off the map, for profit events and nonprofit," says Wightman.

Kelly Carney, vice president of AmWins in New York, estimates they have seen about a 30 to 40 percent drop off in their event business in the last couple years.

"Usually summer for us is pretty busy, and while it has been busy, there is not as much event business as we have seen in the past," says Carney. "I see the business in general is changing. Events will start to pick up once companies have money again."

K&K Insurance Group, which specializes in events of all kinds including auctions, banquets, conventions, festivals, graduations and parades, to name a few, says that the economy has challenged this class but there are still opportunities for underwriters in this segment.

"While events in some regions of the country may have been hit harder by the soft economy than others, the trend overall appears to be that families are attending local events as an alternative to travel," said Lorena Hatfield, marketing resources manager at K&K.

K&K has a short-term program for events that require less complex coverage and one for larger events with greater coverage needs. It recently enhanced its coverage with increased capacity of up to $25 million, higher property limits and additional coverages in the standard package, as well as more pricing flexibility. The company was able to make these upgrades available because of a new partnership with an A+ rated carrier. All in all, it has 25 new coverage enhancements and 11 expanded coverages.

Competitive Market

Underwriters say that the advantage insureds have in this competitive market is that prices are very low in this class because of the extreme competition. Minimum premiums for single day, small events without alcohol can start at as low as $100. The larger the event and the more complicated the exposures, the higher the premium gets. The most difficult events to place, say underwriters, are rap concerts or multi-day festivals with alcohol because of the risks.

One thing agents should be doing when underwriting an event producer that many are not, according to Wightman, is writing annual event policies, not just a once-off single event policy. Wightman says agents that are not knowledgeable in this class don't know about all the coverage options out there.

"You would think that these event producers that do year after year of these special events would have a policy addendum but that's not the case, they almost always have a single event policy," he says. "Event producers doing these events go to their local broker and the local broker doesn't understand the policy. There are only about five or six agencies in the country that specialize in special events."

Darren Lewin, vice president of programs at Abacus Insurance Brokers, agrees this is one of the biggest mistakes he sees agents make in this segment.

"They don't understand the coverages," he said. "Events go under the entertainment umbrella and require an intricate knowledge. Brokers and agents need to know what goes into writing an event."

Lewin says that Abacus works with its agents on becoming experts on the event products out there. It utilizes Travelers for its coverage, as well as other carriers, and can write over 250 different types of events.

Risk Management Concerns

Risk management is also key to underwriting this class properly, says Wightman.

"A lot of agents have never been to an event in their entire life," he says. "You need to have a fundamental understanding of what needs to happen so you need to immerse yourself in the event and find out what are the site challenges. We see a lot of brokers that have never spent an hour on the site."

Carney says reviewing the event contracts and finding out who is involved in putting on the event is also an important part of risk management.

Some questions she recommends that agents ask:

• Who is doing the lighting?
• Will there be concessionaries serving food?
• Who is the security company?

"A lot of times I don't think agents even know to ask those questions or what to look for," she said. "Reading contracts is very important because there are a lot of things to consider. Who is responsible for what and are the proper indemnification agreements in place?"

Ultimately, this class can be one of the more favorable ones to write if agents put forth the commitment.

"This segment is one of the few we have ever worked in that is actually fun in the insurance business," says Wightman. "For someone in the business that is inclined to go to these events and then to be able to incorporate that into your business model can be a lot of fun."