The whole idea behind insurance is to spread risk around so that when something bad happens, the financial blow is softened as much as possible. But when a bunch of bad things happen in quick succession, risk is seen to be greater and thus needs to be re-smeared evenly, like peanut butter on a slice of bread. That means premiums will go up for everyone.
The actuarial tables for concert insurance are being reevaluated again thanks to the disastrous Fyre Festival and the bombing at the Ariana Grande concert in Manchester. This will most likely mean higher ticket prices. Bloomberg takes a look.
Already facing numerous lawsuits, Fyre Festival organizer Billy McFarland was arrested on federal charges last week. The government alleged he defrauded investors who bought into Fyre Media Inc., the company behind the music festival that collapsed so spectacularly in the Bahamas a few months back.
But the fiasco’s graduation to prosecution is almost beside the point as far as the festival industry is concerned. Events constructed to attract free-spending youth tend to include some who drink too much or take drugs and consequently do all the risky things that come with both. Organizers already had it tough when it came to getting insurance. Then Fyre Festival came apart, replete with tent cities, stranded teens, broken promises, and a global media spotlight covering it all.
“How exposed is Fyre Media as a company in the case of litigation?” Fyre Media employees presciently asked management in an early May email. The answer has come in about a dozen lawsuits filed since the concert ended with stranded attendees scrambling for shelter and food on a remote island.
A Fyre-like calamity is the greatest fear of most festival organizers. The majority already seek to protect themselves by obtaining insurance, but it doesn’t come cheap, or easy. Insurers typically begin working with mega-festival organizers well in advance, determining exactly what kind of coverage they need. In some cases, risk and claim specialists will even tour facilities in advance and during the festival in an effort to mitigate any potential issues. In an ideal scenario, risk experts remove every danger, and festival-goers stay safe, employees don’t get hurt, the production company doesn’t get sued, and the insurer doesn’t pay out a huge claim.