EXCLUSIVE: Media Guarantors, the Fred Milstein-led completion bond firm that has helped launch dozens of domestic and international productions, is being sold by parent Cast & Crew to Boston-based SpottedRisk, a four-year-old insurer that specializes in niche entertainment products.
SpottedRisk CEO Janet Comenos says the lack of quality pandemic insurance is top of mind at the combined company, which now has an expanded toolkit to tackle it, although products will undoubtedly cost more than what the industry is used to. She plans to announce several new products in the coming weeks, including several that focus on the helping the independent film sector.
The deal merges the traditional and the new as the insurance business is upended by COVID-19 and searching for models to support entertainment production. A pandemic insurance bill is languishing in Congress. Its sponsor, Rep. Carolyn Maloney (D-NY), barely kept her seat in a contested primary that dragged on for over a month. The entertainment industry is lobbying for relief, pressing its case as an economic engine with jobs on the line across the country. But right now Congress is still struggling to pass its next large aid bill.
“We’ve always been impressed with the Media Guarantors team and the exceptional level of service they provide in an industry that has become commoditized over the years,” says Comenos. “Both of our organizations are bringing new and fresh ideas to the entertainment insurance industry and we have aggressive goals to grow our business in this space.”
Financial terms weren’t disclosed. SpottedRisk was supported in the transaction by its lead backer, Boston private equity firm Schooner Capital.
The company, founded in 2016 by two former tech executives, made its name doing risk assessment profiles of talent for studios, networks, sports teams and brands. It morphed that into a new version of “disgrace insurance,” policies that had been around for 40 years from Lloyd’s of London but paid out poorly and were rarely used. Technology, especially social media, made calculating and covering the financial risk of stars behaving badly into a big business, especially in the #MeToo movement.
“We had created a combination of a Nielsen product with TMZ,” said Comenos.
SpottedRisk now offers 16 specialty products to the entertainment industry — from weather peril and (non COVID-related) civil authority, to covering double booking of talent, to cast leaves for pregnancy and bereavement. Most of its products fill gaps in broader policies. Since COVID, these policies have been both pared down, even beyond the ubiquitous exclusion for communicable disease, and cost more.
“The infrastructure that SpottedRisk has built is aimed to take companies like Media Guarantors to the next level and to provide new and unique product features and services that will enable us to serve our clients better in this dynamic and changing environment than anyone else in the space,” said Milstein. “We feel that our management teams share a sentiment of building a customer-first experience and we are well-positioned in the post-COVID world.”
As a subsidiary of SpottedRisk, Media Guarantors will continue to be run as a distinct brand by CEO Milstein along with head of production and underwriting Scott Nicolaides and Erica Fishkin, head of legal and business affairs. Capacity for the completion bonds are secured directly from AXA XL insurers.
“It’s a disruptive moment in the industry. Old roles are changing and we all have to look at where the business is going to go. They’re a very unique and innovative company. We knew them from some common insurance relationships and started talking and share a common vision and goals,” Milstein said.
Burbank-based Cast & Crew, which provides payroll, HR, accounting, financial, workflow and productivity software and services to the entertainment industry, will coordinate with Media Guarantors and SpottedRisk on marketing, product and service offerings to clients of both companies. Cast & Crew launched Media Guarantors in April 2018 with Milstein and Nicolaides.
Milstein is a former CEO of Seven Stars Entertainment & Media Limited; Managing Director, Worldwide Marketing and Business Development at Aon/Albert G. Ruben Insurance Services; and President and Founder at cineFinance. He also held executive positions at Completion Bond Company, Miramax Films and the William Morris Agency.
Nicolaides was most recently Executive Director, Entertainment Bonds, at ProSight Specialty. Previously he was a production executive at Vendome Pictures, SVP Production at Sidney Kimmel Entertainment, SVP Production at cineFinance and a VP at Buena Vista/Walt Disney.
Film and television, like many industries, have been gobsmacked by COVID-19.
In May, Lloyd’s of London estimated that the 2020 pandemic-related underwriting losses covered by the insurance industry will hit $107 billion. That’s left insurers licking their wounds and scaling back on all kinds of policies, led by pandemic exclusions but in the context of a push to scale down where it can across operations.
Studios and streamers are often able to self-insure. Small, inexpensive productions with limited staff manage with pared down coverage. But mid-sized independent productions have been caught without the pandemic insurance required for completion bonds and financing. The industry was hoping for a government backstop like funds announced recently in the UK and Canada, but that possibility is feeling more distant and the amounts most likely would never be big enough.
PRIA, the Pandemic Risk Insurance Act, is still sitting there. It requires insurers to shoulder 5% of pandemic costs and the industry has said no. Support hasn’t been overwhelming — yet at least — among either party as Maloney and fellow lawmakers have lots on their plate competing for attention.
Several producers and others have noted that in recent week that private equity firms and other financial players have begun to step forward offering pots of cash for responsible productions — but not that often.
Comenos said it’s inevitable that the industry will have to adjust to a new and higher cost of doing business. “We are seeing indie producers way underestimating production insurance costs – by 60%, by 80%.”