Editor's Note: The last series of the Up News Info, Hollywood reopening, focuses on the incredibly complicated effort to get the industry back on its feet and ensure the safety of everyone involved. Our goal is to examine numerous aspects of the business and provide a forum for Hollywood leaders to discuss pressing issues around the restart of production in the coronavirus era.
As film and television producers conspire optimistically to resume closed projects and launch new ones, they are all hampered by a huge blind spot. While those producers are immersed in bringing in medical personnel, temperature takers, and disinfectants to keep casts and crews safe, lack of clarity about insurance and termination bonuses is hampering plans to take off the production industry of a thousand millions of dollars.
The COVID Crisis Working Group works to resolve the & # 39; scandal & # 39; of production insurance
Insurers that are already absorbing thousands of claims for film and television productions that abruptly closed in March (and in thousands of other industries) are not even sure how deep their losses are. Then they have come to a pause in the policies that cover COVID-19. Studies can find ways to avoid this, but even they are uncomfortable. Without adequate insurance available, many independents fear they will not be able to resume production because their bank financing is tied to termination insurance and bonuses. If they are forced to cover potential closings themselves, the results could be catastrophic if, for example, one actor becomes ill and all production is stopped for 14 days or more, with many department heads hired to continue to be paid daily.
"They told us that if we were charged 1.5% or more of our insurance budget, it would double and still not cover COVID-19," said an executive who participates in daily conversations with insurers. "We all believe that the government will have to step in and back this up, because there are millions of dollars at stake in production centers across the country in the red and blue states that need the problem addressed before the business can come. back to life ".
Representative Carolyn Maloney's (D-NY) office is currently preparing a bill to address the issue through government backing for pandemic coverage. It would closely resemble TRIA, the Terrorism Risk Insurance Act, in 2002 after the September 11 terrorist attacks made shooting abroad seem more dangerous. The legislation will be presented next week. Sponsors of the bill expect it to be signed into law before the end of the year.
Will President Trump help Hollywood? His Treasury Secretary Steven Mnuchin has a solid understanding of the issues since he left his job as Hollywood financier to join the administration, and millions in production expenses in Republican cities will also be held at bay unless the trouble.
"In this climate, anyone can get COVID," even with extreme precautions on set like "isolation summer camp strategies where no one can get in or out. But all it takes is one person to get away, and you have a catastrophe." in your hands, "said Vlad Wolynetz, head of television production at FilmRise and former senior production executive at AMC Network.
Jean Prewitt, CEO of the Independent Film & Television Alliance, is the key person for independent producers in Washington, D.C., where several bills are being prepared. He said that Maloney's, chair of the House of Representatives Oversight and Reform Committee and principal member of the House of Representatives Financial Services Committee and the Joint Economic Committee, appears to be the most advanced and can best meet the needs of producers.
The plan is to present it midweek next week. It would restore communicable disease coverage for the three core policies producers use: civil authority, imminent danger, and delivery insurance. It is voluntary, which means that insurers do not have to offer it. But the idea is that insurance companies that do so will attract customers, which also include retailers, technology, travel and other sectors, and others that won't be lost. It asks insurers to cover the first 5% of costs, with the government taking the rest up to a total national limit of $ 750 billion. There is a deductible for insurers equal to 5% of their total paid premiums, the price that will be part of the program.
"It will help restart the economy, will facilitate the reopening and will facilitate the return of some money" in an insurance claim, one of the top political officials said. Insurance brokers and policyholders love it, this person said. "Insurance companies want it to go away until another day. We understand, but we do not agree with the moment. "This person said that the insurers have indicated" that they think there may be another model "but they have not been specific. The dialogue is" respectful, "the person said.
Not surprisingly, insurers are a little stunned. One broker compared hesitant insurance companies to "snakebite victims sucking venom helplessly."
The pandemic "is a danger that has no limits in terms of geography or time," said a sad Evan Shapiro, CEO of insurance giant Chubb in a recent earnings conference call. Chubb, along with Allianz and One Beacon, are among the largest insurers in the entertainment industry. Requests for comment did not immediately respond.
Lloyd & # 39; s of London, the world's largest insurance exchange, said Thursday it will pay up to $ 4.3 billion to its global clients as a result of the coronavirus outbreak. He estimates that the industry will suffer about $ 203 billion in losses from this year's pandemic, including about $ 107 billion in underwriting claims, and the rest of investment portfolios.
A half-dozen brokers and termination bond experts Up News Info spoke to said all parties involved in film and television production are having preliminary talks. They know this has to be resolved, but they are still trying to figure out who will take the hit.
An advantage of Representative Maloney's invoice is that it is proactive, not retroactive. Some states have been asking for retroactive coverage, a problem that has become very controversial. Furthermore, "the fact that we are only trying to restore what insurers have previously offered makes it less complicated than TRIA, which was crafting something completely new," Prewitt said.
The bill will be drawn up in the House and, if the support is there, it will be included in the Heroes Act, the next big infrastructure bill. Then he goes to the Senate. The hope is that President Trump signs it before the end of the year. He has good support, but Maloney's defenders are working to rush more on both sides of the aisle.
"Things are moving fast," said the employee. "Circumstances and life could force us to clarify our thinking and do it."
The key is how well lawmakers understand the importance of film and television production to state and local economies. This is not the Red State versus the Blue State, Prewitt said. “Some of the most popular states, like Georgia, are Republican. So it is not a misalignment in terms of getting attention, once we get past all these bills trying to put money in people's hands so they can get food. "
"The state of Florida declares that professional wrestling is an essential business," said Wolynetz of FilmRise. About Georgia, he said, "I brought The Walking Dead Down there "and he was hugged" big time ".
Outside of a Pandemic Risk Insurance Act (PRIA), other models could resemble the Hurricane Program adopted by the Film Commission and the Office of Economic Development of Puerto Rico in 2009; or a public-private nonprofit organization, the California Earthquake Authority, established by the California Legislature in 1996 that now provides two-thirds of the residential earthquake insurance policies sold in the state.
Insurance "is on everyone's mind," said producer Dean Devlin, CEO of Electric Entertainment mini studio. Including yours, even with a prolific 15-year history of successful deficit financing. “The bar has definitely gone up. The path to the green light is much more difficult now. Financing is more difficult. The margins will be smaller.
Along with more expensive insurance, the new security protocols will also significantly inflate the total production bill. In a recent interview with Up News Info, producer Randall Emmett described a huge success but said he would swallow it. "We hope there will be a financial impact on the budget, and if it is a quarter of a million dollars, or $ 150,000, we will." I want us, as an industry, to go back to work. ”
Not all indies can afford it.
"It is a brick wall," said Peter Marshall, managing director of DeWitt Stern, an insurance brokerage and risk management firm, which helped design the Puerto Rico program. "If we want the movies to return to the United States, we will have to find a solution."
Independent productions in progress when COVID-19 hit and which were forced by the authorities to close can be resumed, when they can, under pre-existing policies with coverage. Up to 1,000 independent film and television productions may have filed claims worth around $ 400 million, industry players speculated. (Both figures are unconfirmed estimates). One of the big production and event insurers has only had 600 claims since March compared to a total of six last year, according to a person in the industry who did not specify which insurer. That person said the Alliance was the first player in the industry in March to start putting a COVID-19 exclusion on their insurance policies; Chubb started a little later. "People were running to our offices saying," We have this magic ticket "for a while," said the person.
Claims under civil authority and imminent danger clauses, which are the equivalent of the film and television industry to business interruption, have generally paid off. However, they have sub-limits, generally $ 500,000 to $ 2 million, depending on the size of the production. Therefore, they will end up being more useful for productions that were already close to the finish line.
Delivery insurance can be important, since it covers the loss at the closure of a production, temporary or permanent, if you lose the essential cast. Pending some solution, all three now exclude COVD-19 and communicable diseases.
A producer filming around the world said this will likely reduce the number of productions, especially in movies, which might not be a bad thing. "A lot of movies that shouldn't be made won't be made," said the producer. "If you have a history and a long relationship with insurance companies and termination bonds, you will find a way, but it will cost you much more. The deductible will certainly be higher, and you might say, we will cover the first $ 2.5 million and then cover the next amount of that, or anything above it. Wildcards will be insurers who want to enter the space and are willing to risk settling down. "
Marshall says he has created domicile investigation reports in 11 foreign countries where productions are least risky, such as New Zealand, Australia, South Korea, Denmark and Norway, analyzing a variety of different factors. "In the US we rank pretty low because of where we are in the curve and the regulation," he said.
It is not that he wants the productions to leave the United States. "We have to stop calling it Hollywood," he said, pointing to high-production states like New Mexico, North Carolina, Georgia, Ohio and Louisiana. “If you ever appear on a movie or on a television, 90% of those people are manual workers, most are in unions and are of all political persuasions. There are many jobs at stake, and good jobs, for people leaving school, for the future. "