Lights! Camera! Insurance!

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Little magic would appear on the silver screen if it was not for the security that insurance provides to filmmakers.
  • With the high cost of film/TV production, any delay can significantly impact a studio’s budget and cause losses to mount
  • Entertainment insurance covers cost and extra expense resulting from potential delays due to injuries to actors or props/sets/equipment damage and equipment breakage
  • The entertainment business has grown internationally – especially in China and Europe – and the industry is technologically more advanced as time goes on
  • Hollywood still commands the most insurance premiums with an estimated $400mn annually

No insurer would cover James Bond given the extreme punishment he inflicts upon his body – not to mention the property damage he causes – in service to Her Majesty, The Queen. Daniel Craig is a different matter. The latest actor to play the suave superspy, Craig, like other incarnations of 007 before him, must be insured before setting foot anywhere near a set.

Why insurance is necessary was clearly demonstrated during the filming for Spectre (2015), the 24th film in the James Bond series. The then 37-year-old actor suffered a meniscus tear during a stunt and underwent arthroscopic surgery. This resulted in a significant delay.

“With daily shooting costing up to half a million dollars a day for a blockbuster, losses can quickly mount if filming is delayed,” says Michael Furtschegger, Head of Entertainment International at Allianz Global Corporate & Specialty (AGCS).

As a filmgoer, Furtschegger prefers thrillers and blockbusters like the Mission Impossible series. However, when it comes to underwriting, he loves comedies, dramas and especially romances.

“They are easier to cover,” he explains with a laugh. “They tend to be without the death-defying stunts and high-octane pyrotechnics of the blockbusters.”

Between the dangerous stunts, the kaleidoscope of explosions and human error, a lot can go wrong on a set (see infographic). Most studios and independents will not start a film unless it's insured against potential delays from injury or incapacitation of actors, damage to props, sets and costumes, and equipment breakages. AGCS also covers extra expenses such as damage to film material. Historically this meant 16mm or 32mm film, but nowadays covers storage on electronic devices such as chip cards.

As part of their daily work, the global entertainment team analyzes scripts, shooting schedules and budgets. In their assessment, among other factors, the AGCS underwriters look at the cast involved, the stunts, the locations where they will be shot and sensitive medical history of the actors.

Nicole Kidman is one actress who was plagued by a health problem. After insurers paid $3 million in production delays when she injured knee on the 2001 film Moulin Rouge, the injury prevented her from filming Panic Room (2002) and Jodie Foster was brought in as a costly replacement.

Typically - depending on genre, insured budget, deductibles and other risk factors - premiums can range from 0.6% to 1% of a movie's total budget, which could amount to between $1mn to $2mn for a $200mn movie. Furtschegger says coverage usually has to be tailor-made for each production, and with blockbusters costing $200 million or more there is a lot riding on the risk assessment getting it right.

“We see a lot of ‘red flags,’ but usually find a compromise in discussions with the client and by risk appropriate underwriting actions,” says Furtschegger. “However, anything involving a member of the main cast doing their own stunts has proven to be very risky to cover. And once a famed documentary channel inquired about a presenter being swallowed by a python – that was a definite ‘No.’”

Typically, the AGCS underwriter assesses the risks in meetings with brokers and clients, special effects managers and technical crews well before the first day of shooting. For blockbusters, however, a risk engineer is often on-site to assess the risks and liabilities involved in stunts.

After thorough risk assessment it could well be that Allianz requires changes to the script because of risk aggravating factors like asking to add stunt doubles or to rewrite scenes to limit the risks the actors are involved with.

Allianz has a long link with the film industry stretching back to Hollywood’s early silent era in the 1890s through the Fireman’s Fund Insurance Company. From the Keystone Cops and Charlie Chaplin to Harry Potter and the latest Marvel superhero films, AGCS has protected thousands of Hollywood blockbusters, independent films and documentaries, as well as commercials and television productions.
Some of the classics insured during those decades include Spartacus, The Godfather, Apocalypse Now and The Dark Knight Rises. The company also underwrote the Iowa cornfields in Field of Dreams, treasures of the Louvre during filming of The Da Vinci Code and the Sunset, the ship cast as The Black Pearl in Pirates of the Caribbean, when it sailed from the Bahamas through the Panama Canal for filming.

“I think our long history gives us an outstanding reputation,” comments Furtschegger. “It is why today every second or third blockbuster is insured by us.”

One of the longest associations is with the James Bond franchise.

“I think that is a good example of a true trust relationship we have built up over decades and why we are the insurer of choice for so many companies,” he says.

Since 2015, when Fireman’s Fund was integrated into AGCS, the business has grown internationally. This mirrored developments within the industry. New market formats such as online streaming from players like Amazon and Netflix were challenging the status quo. Today, those companies are among the largest producers of content worldwide.

“We started offering our film portfolio globally and it was great timing,” says Furtschegger. “These companies have gone truly global and are looking for a partner that can support them with a standardized global approach. In addition to our international breadth, we also have local insurance capacity that competitors cannot compete with.”

The other significant trend, Furtschegger notes, has been the rise of Chinese film industry. While Marvel Studio’s Black Panther generated over $100mn in China after its March 2018 release, Operation Red Sea, an action movie about Chinese troops in Yemen that debuted the same month, grossed $579mn. This year has also seen a string of other Chinese domestic successes including Detective Chinatown 2 ($541mn, Dying to Survive ($451mn) and Hello Mr. Billionaire ($367mn). In fact, of China’s 10 all-time highest-grossing movies, five are domestic films released since 2017.

“There has been a boom in Chinese cinema and given the budgets, a corresponding growth in awareness about the importance of insurance,” says Furtschegger.

Globally, the entertainment and media industry has been growing by 5.1% annually for the past four years and is expected to continue so in 2019. Although figures are difficult to come by, Hollywood still commands the most insurance premiums with an estimated $400mn annually, followed by the UK with approximately $40mn to $50mn and then France and Germany at $20mn to $30mn each. China is around $45mn and growing.

 “I think it is fair to say that without insurance there would be no film industry,” says Furtschegger. “Without insurance, there would be few backers to provide the big finance needed to put the magic on the silver screen and we at AGCS are one of the few parties worldwide with the ability to provide the necessary insurance.”

Read this article in Global Risk Dialogue. Appearing twice a year, Global Risk Dialogue is the Allianz Global Corporate & Specialty magazine with news and expert insights from the world of corporate risk.
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Allianz operates as an international insurer on almost every continent. Find Allianz in your own country/region.
With the Allianz network AGCS provides services in over 200 countries and territories.