For independent filmmakers, the Covid-19 pandemic has added a new hurdle to the already difficult task of finding funding: finding insurance to cover interruptions related to the virus.
Lenders demand it, and it’s hard to come by. So hard, in fact, that independent films have been forced to shut down by shifting demands from financiers fearing the virus could cause huge losses.
Business interruption insurance was not a problem for small filmmakers, but the coronavirus is new and difficult to assess. As a result, producers who don’t work with big studios like Walt Disney Co. or Netflix Inc. have a hard time getting their projects off the ground. Before the pandemic, policies could cost $ 400,000 or more. Now they cover less and are hard to come by.
“We are currently going through an insurance crisis,” said Brian Kingman, general manager of the entertainment practice of Arthur J. Gallagher & Co., which negotiates insurance policies in the entertainment industry.
Virus problems are not completely new. When SARS broke out in Asia in 2003, insurers responded by putting exclusions in many business interruption policies. But cinema and television were largely spared. Now movie insurers are looking to add them, and it’s giving lenders a break, according to Aaron Baum, vice president of entertainment industry and media practice at insurance broker Marsh. His company is part of Marsh & McLennan Cos.
âTheir financiers don’t want to put money into the project if there are Covid-19 related exclusions on policies,â Baum said.
Producer-director Richard Gray discovered it when he was about to start filming “Murder at Emigrant Gulch”, the working title for a film about the murder of an immigrant in 1882 after finding gold in Montana. Gray, who directed the 2020 independent release “Robert the Bruce”, has been working on the photo for three years. He, along with Carter Boehm and Colin Davis, used the new state tax credit to build Yellowstone Film Ranch, a multi-million dollar backlot depicting a western town about 45 minutes from the same national park. name.
When Covid hit, a main lender’s demands changed from week to week, Gray said in an interview, and ultimately forced his team of 110 to shut down just a week before the shoot when they didn’t. was able to obtain a completion bond including anti-virus coverage.
“We’ve never seen anything like it,” the Australian native said over the phone. âWe are always insured.
Without the vaccine, Hollywood and insurers say government support is the only way to revive the industry. A proposal by US Representative Carolyn Maloney, a Democrat from New York, would create a solution similar to that put in place for the terrorist risk after the attacks of September 11, 2001.
The Pandemic Risk Insurance Act would create a federal safety net for business interruption policies that cover pandemics. Although the bill has yet to be passed, Maloney is still pushing for the proposal.
âThe loss of insurance coverage has dramatically reduced our industry’s ability to work – affecting thousands of jobs across the country in virtually every state,â said Jean Prewitt, head of Independent Film & Television Alliance, who works with Maloney.
With many productions closed to prevent the spread of Covid-19, the pandemic has affected all filmmakers. But the big studios are able to absorb the additional financial risk. Crockett Woodruff, senior vice president of City National Bank in Los Angeles, said his company has come up with arrangements in which a large studio self-insures.
âAs long as they have the financial means to do it, we’ll consider it,â said Woodruff, although the vast majority of filmmakers aren’t that well off. Earlier this month, Lions Gate Entertainment Corp. has abandoned his plan to produce “The Plane” with Gerard Butler due to insurance issues, Deadline reported.
This gap left by the withdrawal of insurers has created opportunities for companies such as SpottedRisk, an insurer that partners with different carriers. The company is evaluating set safety precautions as part of its underwriting models, according to Janet Comenos, co-founder and chief executive officer. But coverage tends to be more expensive.
âFor the first time, insurance is a focal point for the industry rather than an afterthought,â Comenos said.
Nicole Haggerty, COO of SpottedRisk, said the company was benefiting from not offering this coverage when Covid-19 first struck, meaning it didn’t have to clean up previous losses. SpottedRisk has dug even deeper into entertainment insurance with its acquisition this year of Media Guarantors, a general-purpose managing insurer that focuses on completion obligations with capacity provided by Axa SA insurers.
Unsurprisingly, some filmmakers and their insurers are now in court. Chubb Ltd. was sued by Hoosegow Productions Inc., the company behind Ben Affleck’s thriller ‘Hypnotic’, for failing to renew an insurance policy that would continue to allow Covid-related disruptions. The case is due for trial in October 2021.
Chubb said in a statement that there was “no contractual right” to extend a policy on the same terms as the original agreement.
âFor over 200 years, we’ve always strived to do the right thing, resolving claims quickly and fairly,â the company said. âAny significant increase in risk, such as the Covid-19 pandemic, must be taken into account when renewing the policy. “
Filmmakers like Gray are scrambling to reorganize funding and get filming started. In some cases, they find others willing to accept the risk. A few days after Lions Gate dropped “The Plane”, Solstice Studios picked it up. The company started two years ago with a capital of $ 400 million, according to its website. But there aren’t many companies like Solstice, and films that are in their infancy are less likely to be acquired.
The recent vaccine promise has raised hopes that production may soon return to normal. Calls for some insurance policies have slowed with vaccine development, according to Marsh’s Baum.
âWe don’t get as many calls on these products because of the vaccine news,â Baum said. âPeople are taking a wait-and-see approach. “
Copyright 2021 Bloomberg.