Playing It Safe Gets Harder

The United States fell victim to terrorist attacks in 2001. In 2003, Toronto was faced with Severe Acute Respiratory Syndrome. This summer, the Gulf Coast endured multiple hurricanes.

In each case, tradeshow organizers were faced with the costly decision of whether or not to cancel or postpone their shows. Months earlier, these same show organizers had to decide whether to purchase cancellation insurance.

Insurance has evolved since the events of Sept. 11. After each disaster, companies re-evaluated and adjusted their policies to be more specific and incorporate more exclusions.

Eileen Hoffman, assistant vice president of Aon Assn. Services, estimated that about 20 percent of tradeshows have cancellation insurance. The Showstoppers Insurance Program, administered by Aon, provides event-cancellation coverage for rescheduled and relocated shows.

"We help the organization be made whole, like the event happened," Hoffman said.

In the case of rescheduled shows, organizers can file claims for reduced attendance, as well as relocation expenses. "Maybe those that could make it to the original show can't make it now and want their money back," Hoffman said.

The policy must be purchased within at least 30 days of the event, but can be bought as early as two years ahead of time. Most people buy it six months to a year beforehand, she said. Coverage begins once the policy is paid for and ends five days after the event's conclusion.

James Chippendale, president of CSI Entertainment Insurance, recommends purchasing insurance as soon as possible. Thus, the insurance company is bound to the contract, and any limitations that could come up between the purchase date and show time are taken care of.

Michael Robertson, president and CEO of Specialty Graphic Imaging Assn., knows the consequences of canceling a show without insurance.

Scheduled to take place in Anaheim just days after the attacks on Sept. 11, his annual show, SGIA '01, was canceled when the airlines were grounded, making it impossible for attendees to get there. Since the show was not insured, the association lost millions, he said.

Prior to the events of Sept. 11, policies were all risk. After the terrorist attacks, insurers looked at their policies and began offering different options for terrorism coverage, Hoffman said.

On Nov. 26, 2002, the U.S. Congress passed the Terrorist Risk Insurance Act, which forced companies to offer coverage against acts of terrorism. At the same time, Congress agreed to help insurance companies offset the costs. The act is up for renewal at the end of this year.

The Assn. for Healthcare Philanthropy Annual Intl. Educational Conference, scheduled Sept. 12-16, 2001, was canceled as a result of the attacks.

Terry Rainey, executive vice president, said the association was insured for the full amount of potential revenue. The association filed a claim and was reimbursed.

"We heavily insure ourselves, and always have, because the show is the central revenue event of our year," he said. "We don't take any chances. We'll pay within reasonable bounds, because we know the consequences."

DÉCOR Expo Atlanta, which was scheduled to take place during the week of Sept. 17, 2001, was canceled as well.

Although the show's general insurance policy through Showstoppers did not have an exclusion clause for terrorism, show management decided to take matters into its own hands. Rather than risk not receiving any money from the insurance company, it worked closely with its exhibitor base.

"We did the right thing by canceling the show, but we had a big problem because we'd already paid a lot of expenses," said Eric Smith, vice president of the art group for Pfingsten Publishing, which manages three DÉCOR Expos.

Since most of the money from exhibitors and attendees already had been paid in full, the show continued to operate as though it would not receive insurance money. Companies that bought just one or two booths were automatically given credit for the following year's show, rather than a refund. The larger exhibitors received a two-booth credit also, but had to use the remaining money on anything but exhibits, such as sponsorships, electronic media and e-mail blasts.

"We couldn't survive as a show producer if we gave out refunds, and exhibitors understood that," Smith said.

Today, Smith purchases weather insurance for each show about six months in advance, but does not have terrorism coverage.

"Terrorism insurance is four times as expensive as weather," he said. In fact, Smith said, he pays twice as much today for weather insurance alone as he did for everything four years ago.

In 2003, the North American tradeshow industry was hit again when shows scheduled in Toronto had to be postponed or canceled due to SARS.

The Intl. Society for Magnetic Resonance in Medicine Scientific Meeting & Exhibition was postponed because a travel advisory came out, said Roberta Kravitz, executive director. The show, which was supposed to take place in May, was rescheduled within two months at the Metro Toronto Convention Centre.

Although the show was insured, Jennifer Olson, associate executive director, said the society chose not to file a claim, because the show didn't experience any dramatic decreases as a result of the postponement.

Before the outbreak, show cancellations due to SARS were covered by insurance, Chippendale said. Since then, exclusions have been inserted and such coverage is no longer available.

Hoffman said that after the SARS outbreak, some companies paid a loss to tradeshows that were affected, and then changed the policy. Now, it excludes not only SARS, but all communicable diseases, including the highly publicized Asian bird flu.

CSI Entertainment Insurance's general policy covers fire, earthquake, weather and basically anything that causes the majority of an audience to be unable to attend, Chippendale said.

Hurricanes fall under the weather portion of general insurance policies. However, if a show is held on the coast during hurricane season, insurance will cost more, Hoffman said. This is the case for all so-called pre-existing conditions, such as earthquakes on the West Coast or winter snowstorms in the Northeast.

"You pay more, because the cost of those potential disasters is built in," Hoffman said.

After canceling its show in 2001 without insurance, the SGIA had to refund payments by exhibitors and attendees who had already registered. The focus became keeping the association afloat without the revenue typically generated by the show. When the show had to be canceled again this year due to Hurricane Katrina, Robertson was prepared. He had bought cancellation insurance when the Southeast began having twice as many storms as usual.

He filed a claim to collect what the association would have made had the show occurred and is currently working through the process. Robertson said he's optimistic the association will receive its entitled reimbursement.

Stephen Schultz, executive director of conventions and expositions for the Natl. Electrical Contractors Assn., also filed an insurance claim after canceling the association's annual show due to Hurricane Katrina.

"We are looking to recover expenses that were paid out that we can't get back, like brochures that were printed and went out to members back in May and June," he said.

Schultz also found alternatives to giving exhibitors monetary refunds. They had the option of rolling over the money that was already paid for this year into a booth at next year's show at the same price, getting a full refund and buying a booth next year at next year's price, or just receiving a refund.

This is the first claim Schultz has filed in the nine years the show has been insured, and he anticipates it will take about four to six months to complete the process.

Chippendale thinks the biggest change carriers have made since Sept. 11 is in the limitations they put on coverage. Now, clients must buy additional coverage if they want protection from such things as terrorism. The more coverage a show wants, the more expensive the policy will be.

Certainly, exclusions always come after a catastrophe that leads to hefty claims for insurers. Insurance executives say they need to manage their risk too.

Chippendale said companies won't stop covering hurricanes after this year, but they might limit coverage by only paying up to a certain amount of exposure. Even then, it's likely to be offered at a premium.

"Coverage in coastal regions during hurricane season is expensive," he said.

Interest in cancellation insurance has increased since 2001. Chippendale said more organizations want to know about insurance, while those that have become more educated have also become more savvy buyers. He agreed that about 20 to 30 percent of tradeshows are insured, but said the number could approach 50 to 60 percent next year.

Show organizers agreed that, while insurance has not necessarily become harder to get, it is more expensive.

"The availability is there," Chippendale said. "If you want to cover any and everything that could happen, that is not realistic, unless you want to pay for it."