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LONDON -- Millions of dollars of insured losses resulting from the recent cancellation of two major entertainment tours are not expected to harden rates in London's competitive contingency market, which covers cancellation, entertainment and event-related risks.
The entire Australia and New Zealand leg of Michael Flatley's Lord of the Dance worldwide tour was canceled last week after the hospitalization of Mr. Flatley due to a chest infection. Mr. Flatley is the lead dancer and creator of the Celtic folk dancing show, formed after he left the Riverdance troupe.
All tickets will be fully refunded, said Stephen Marks, a partner of London accounting firm Gelfand Rennert Feldman & Brown. Mr. Marks, who is Mr. Flatley's accountant, said the tour's cancellation is covered by insurance, though he would not comment on any aspect of the insurance or the size of the loss.
Australian newspapers last week estimated the cancellation would cost $10 million Australian ($6.8 million).
Ticket refunds also are being made in connection with the cancellation last month of INXS's concert tour. The tour was canceled after lead singer Michael Hutchence committed suicide Nov. 22, four days before the tour was due to begin.
The band's Melbourne-based promoter, Frontier Touring Co. Ltd., refused to comment on any insurance arrangements (BI, Dec. 1).
However, London market insurance executives told Business Insurance that Mr. Hutchence's record company, PolyGram Records, has what is known in the market as a confidential life insurance policy worth several million pounds that reimburses the company in the event of the singer's death. A confidential life insurance policy covers the life of a third party, who may or may not be aware of the coverage, by a policyholder that would be exposed to loss if the party dies. PolyGram would not comment.
The contingency market is very competitive at the moment, and the combined losses would have to be very large to have any chance of raising rates, said Kelvin Mercer, managing director of ASU Enterprises L.L.C. The company, which recently merged with Boston-based American Specialty Underwriters Inc., underwrites event cancellation and other contingency risks for a group of 15 Lloyd's of London syndicates.
Mr. Mercer estimated it would take combined losses of at least $20 million to $30 million to have any impact on the market.
"This downturn in the cycle is particularly severe," he said. "Rates have dropped dramatically in the last two to three years, and it's difficult to see where its going to end."
Rates for contingency coverage are continuing to decline, agreed John Silcock, a director at Robertson Taylor Insurance Brokers in London.
Robert Wood, a director of broker Adams Brothers in London, agreed that the market is "extraordinarily soft" but said the Lord of the Dance loss could begin to bring more realistic underwriting to the market.
The cancellation of the entire tour of a successful show "will be a substantial loss," he predicted.
Contingency losses this year mainly have related to events canceled due to bad weather, such as the heav