The entertainment business doesn’t work without insurance. And right now, the insurance industry is getting crushed.
That poses a tremendous obstacle to restarting film and TV production: If insurers aren’t willing to sell policies, then the cameras won’t roll.
“This is a giant problem,” says Jean Prewitt, CEO of the Independent Film & Television Alliance.
First, some good news.
Costs incurred by the production shutdown should be covered — up to a point — under various industry-standard insurance policies. None of those policies has a specific exclusion for pandemics.
But that’s bad news for the insurance carriers who will have to pay those claims.
“In the movie industry, there’s probably $300 million to $500 million in claims because of coronavirus,” says Bob Jellen, managing director of the entertainment practice at Hub Intl., a major insurance broker.
Brian Kingman, managing director of the entertainment practice at Arthur J. Gallagher, pegged the number even higher, at $500 million to $1 billion.
Insurance carriers have already decided that they will not cover pandemic-related losses on any new policies. That means producers will either have to take that risk themselves — or stay idle.
“It’s going to be very difficult if you’re in the motion picture business to figure out what to do,” says Kirk Pasich, an attorney who handles insurance disputes.
The larger studios — the Disneys and the Netflixes — at least have the capacity to assume the risk of a coronavirus shutdown.
“They would prefer to buy insurance, but in many cases these streamers and big media conglomerates are bigger than the insurance companies,” Kingman says. “They can make whatever they want, whenever they want.”
But smaller studios and independent productions will be in a quandary. Independent films are typically financed in large part by completion bonds, which depend on insurance.
“If you’re not fully covered, you’re going to have difficulty getting it bonded and difficulty getting it financed,” Prewitt says.
Several independent producers contacted by Variety say they are still trying to sort this out. There is some optimism that small films will be seen as safer than massive productions. But it’s also quite possible that studio films will be getting produced while independent films will not.
“It’s sad when certain movies might not be made,” Kingman says. “That independent producer that’s always been such a unique and creative force in the industry needs some help here in order to survive.”
Some in the industry are looking to the federal government to step in and provide a backstop. The government could create a reinsurance pool that would allow carriers to cover pandemic losses, as was done with terrorism-related risk after 9/11.
But anything that looks like a bailout for movie producers could be politically toxic.
“We’ll see which way the politics land,” Pasich says.
In the meantime, no one is eager to accept the risks of restarting production.
“The future of moviemaking is being challenged,” Jellen says. “We’re trying to figure out ‘What are the alternate ways we cover these risks?’ That’s what we’re exploring.”