When COVID-19 hit in March, insurance companies abruptly backed away from pandemic coverage, a fateful move that’s hobbled efforts by independent producers to lock in financing and disrupted Hollywood as film and TV production attempts a comeback.
As insurers — spooked by global pandemic payouts that could top $100 billion this year — drag their feet, two firms have started to offer producers COVID policies. They’re super expensive, very limited, and there aren’t many available given the lack of capacity. But the firms, SpottedRisk and Elite Risk, are at least chipping away at the edges of Hollywood biggest challenge: getting independent content financed in today’s riskier COVID world.
Just think, if The Batman — which shut down last week after star Robert Pattinson tested positive for coroanvirus — had been an indie production, it might be grounded for good, its producers in financial ruin.
The moves come as PRIA, the Pandemic Risk Insurance Act, takes the spotlight again after several hearings were rescheduled this summer. The bill’s sponsor, Rep. Carolyn Maloney (D-NY), senior member of the House Financial Services Committee, will host a public discussion Thursday flanked by stakeholders including the Independent Film & Television Alliance (IFTA). Maloney has been having “substantive conversations” across the aisle, a staffer familiar with the legislation said, anticipating some movement on the bill by year end.
SpottedRisk, based in Boston and Los Angeles, says it has bound four policies (three TV series, one film), with commercial lenders and equity financiers attached and budgets ranging from $8 million-$40 million. The firm, represented by TigerRisk, an insurance and reinsurance broker specializing in catastrophic coverage, approached as many as 50 insurers before managing to line up capacity to back a handful of productions with budgets of up to $50 million, said CEO Janet Comenos.
Its first round of capacity exhausted, Spotted is now receiving submissions for a second round that Comenos said is larger but still limited and could cover eight to ten productions.
Elite Risk, meanwhile, has placed coverage on 12 smaller TV and film projects, from movies of the week to series and two features, with budgets of around $3 million. Elite offers offers pandemic coverage — including COVID-19 relapse — for cast, civil authority and imminent peril. It costs 8%-12% of a production’s budget. “I acknowledge it is really expensive,” Elite founder and CEO Jeff Kleid said.
Civil authority and imminent peril insurance, respectively, cover expenses incurred if a government entity orders a production shutdown, or in the case of a shutdown due to severe impending danger that can’t be ignored.
SpottedRisk’s product is specific to COVID-19 and any future mutations of it, rather than pandemics broadly. It offers cast insurance for delayed or abandoned production, covers expenses if crew members become ill, and also covers civil authority. The cost is 7%-10% of budget, with policies capped at 120 days’ duration.
In both cases, premiums are due almost immediately — within two or three days of signing, before most productions have money in the bank. That’s an accelerated timetable compared with traditional insurance and can be an obstacle for smaller independent producers that don’t have lines of credit. Spotted Risk’s current policies are with entities that do, but Comenos said the firm is trying to develop an adjustment that would solve the immediate payment issues for indies.
New COVID-19 policies are meant to fill a gap and layered on top of traditional insurance, which, in comparison, has historically cost about 2% of budget. That’s unfortunately also rising as insurers look to recoup payouts on the tsunami of COVID claims.
SpottedRisk is not an insurance company itself but develops coverage models then approaches insurance companies, and more recently alternative investors like private equity firms and hedge funds, for capacity — the financial commitment underlying the insurance.
Elite works partly through a so-called captive insurance company it owns as well outside insurers.
Both CEOs want the ability to insure more projects with higher budgets and both were clear that to do so they need insurers and investors to provide more capacity for COVID-19 insurance so that banks and others are comfortable resuming lending. Neither were shy acknowledging they want press coverage to attract fresh funds.
The industry is a web of big and small insurers, brokers, completion bond specialists and various intermediaries with shifting alliances that even insiders call confusing, competitive and territorial. Players interviewed had a wide range of opinions of both firms, ranging from supportive to skeptical.
Production has been cautiously ramping up since the coronavirus shuttered sets in mid-March even as financing slowed, hitting independent producers the hardest. Streamers and big studios like Disney can self-insure. “If Netflix or Amazon have to shut down a production, they consider it a rounding error in their budgets,” said one insurance broker. Financing has been tougher for smaller producers without the COVID guarantees needed to obtain a completion bond.
Some film and and TV producers can tap into insurance funds available in other countries like the UK, but the pots are too small to make a real dent. Others are cutting budgets, setting aside funds to cover the unexpected, and seeking outside financing comfortable enough to step up contingent on strict health and safety protocols.
“It’s reasonable to look at any offer,” said Jean Prewitt, president and CEO of IFTA, which reps indie producers and has been following their insurance conundrum closely. “It’s not a substitute for what was there before,” she said of the nascent COVID policies. “But our industry wants to go back to work right now … The question really is, is there a short-term product that bridges that gap?”
“There is too big an appetite for content,” said Mickey Mayerson, a Los Angeles entertainment attorney who has worked with SpottedRisk on developing several products. He and others hope private equity in particular will agree to backstop COVID insurance.
Big PE players are said to be eyeing the space. They have also stepped up occasionally to finance production directly.
Kirk D’Amico, president of Myriad Pictures, said he just finished shooting the Livia De Paolis-directed The Lost Girls in the UK with funding from private equity (and Ingenious Media, whose Peter Touche executive produced with D’Amico).
“It’s a situation where there’s no completion bond on it and they went ahead with the [pandemic] exclusion on the production insurance because the private equity and the company were willing to take that risk — understanding that if a cast member got sick then they’d have to re-cast or figure something out,” D’Amico said.
But “These are unique circumstances. We don’t see a lot of people rushing to get in to this,” he said.
“The exciting thing in this space is that outside money can fix this problem. And there is a lot of it,” said Elite Risk’s Kleid. “What happened in March won’t happen again. You will not have the whole world literally leaving sets, in the middle of nowhere.”
Still, there’s already speculation about the next pandemic, and individual productions remain at risk, evidenced by The Batman debacle.
“I want to be very positive about this. It’s in my best interest to be positive about this. Everything will be fine until it isn’t. If someone sues a production company for not addressing proper safety protocols, than that will set people back,” D’Amico said.
Meanwhile, Rep. Maloney’s PRIA, which includes measures helpful to film and television producers, still has no Republican co-sponsor. But she’s talking with Republicans “on how to move forward in a bipartisan matter and is hopeful that it leads to something sooner rather than later,” the staffer said.
Insurers have opposed PRIA, a public-private solution that would require them to shoulder 5% of claims, with the government picking up 95%. The insurance industry has floated several of its own solutions but none are really relevant to film and TV production, or seem to have made headway in Congress. There appears to be some coming together, however, as a handful of insurance companies and trade groups are on the lineup for Thursday’s discussion.
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