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NEWS&VIEWS March 2018 INDIA News&Views CONTENT Message 1 CEO’s message from the 2 Bollywood Movies: An insurance perspective CEO 4 Global Risk Report 2018 5 Other news and insights 6 Marsh in the media 7 Marsh events Dear all, In addition to industry-specific risks, organizations also have to deal with global risks that can cause loss As we make inroads into the first quarter of the New Year and devastation beyond imagination. The Global Risk with great anticipation, we are happy to publish the first Perception Survey conducted by the World Economic edition of our newsletter, News & Views, for 2018. Forum, articulates these risks based on their anticipated impact according to the responses of nearly 1,000 risk The past year has been an eventful one and the coming professionals. With the United States having withdrawn year holds great promise for the insurance industry. With from the Paris Agreement, concerns on environmental government’s announcement of the National Health risks ranked most highly. Rising concerns surrounding Protection Scheme – Ayushman Bharat, health insurance the geo-political landscape led to the use of weapons of penetration is likely to scale new heights. mass destruction being ranked as the most prominent risk over a 10 year horizon. In the last financial year (2016-17), the general insurance industry saw a staggering growth of 32% and in the Last year also saw a slew of cyber-attacks like the current financial year, this robust trend has continued WannaCry ransomware which infected around 200,000 in the current year as well. During Apr-Dec period, total computers in over 150 countries according to a report by premiums collected by non-life insurance industry stood Europol. As systems become increasingly interconnected, at around INR 1.09 lakh crore, registering a growth of 19% the cost of a cybersecurity breach is capable of bringing on a year-on-year basis. operations to a standstill. With the non-life industry poised for accelerated growth, In this edition, we have covered these issues besides our it also presents a unique opportunity to the broking usual News & Views section as well a glance at our events industry to scale higher peaks. in the previous quarter. The value brought in by insurance is also expanding We hope you find our newsletter informative and to embrace policies that cover a diverse range of insightful. Please do share your feedback with us. needs. The requirement for insurance protection is Through this newsletter, we hope to invite discussion on now moving towards tailor-made products suiting the issues of mutual interest for us all. needs specific to various industries. The entertainment industry grappled with its own setbacks last year with Warm regards, big budget movies facing various issues, both in the pre and post production stage. For its investors, this led to tremendous uncertainty given the amount of investment that had gone into the project. As the budgets in the SANJAY KEDIA entertainment industry increase, there is a growing need Country Head and CEO to cover these risks, particularly for distributors. Marsh India NEWS&VIEWS March 2018 BOLLYWOOD MOVIES: AN INSURANCE PERSPECTIVE With the controversy surrounding a recent Hindi movie it is a good time to review how film or entertainment insurance policies have developed in India. On the wake of different controversies surrounding recent films with historical references, production houses are now aware that films can be impacted not just in the pre-production and production phases, but also even after it has been released. Like the recent events, it is not rare in India for a movie, particularly with a historical context, to be banned in multiple states even before the Central Board of Film Certification certified the film. For such films, mob attacks and disruption in production stage causing a delay in the release of the film, is not uncommon either. Luckily, there are insurance policies which are often used and come in handy in such cases. Now let us look at how, an insurance cover can be beneficial for such mega projects. INCEPTION Bollywood started taking insurance seriously from the late 1990s. Since then, insurance has become an indispensable part of films in Bollywood. For the initial 8-10 years, filmmaking was treated as project insurance, where the cover ceased on completion. However, in 2009, after an outbreak of Swine Flu, authorities in Maharashtra ordered a shutdown of public places like schools and theatres. This badly affected the collections a couple of high profile movie releases that took place at the time. This episode prompted the introduction of the ‘distributor’s loss of profit’ cover. 2 News&Views Bollywood started taking insurance seriously from the late 1990s. Since then, insurance has become an indispensable part of films in Bollywood. NEWS&VIEWS March 2018 CURRENT INDUSTRY HOW IT WORKS: At present, nearly 70% of the films produced in Bollywood are covered under Firstly, the Film Production insurance where as big-budget films from South India are also looking for Package Insurance comes into insurance covers. For regional movies, insurance adoption or penetration is effect in the pre-production and presently at around 25%. production stages. The policy covers any damages to the sets and its Currently, there are two broad types of covers associated with filmmaking in equipment. The policy also covers India, namely Film Production Package Insurance and Distributor’s Loss of any losses if production of the film or Revenue (DLOR) Insurance Policy. Sum insured for both the policy varies shoot is affected due to other perils with the premium paid. like adverse weather conditions or act of god incidents like earthquakes According to Marsh India analysis, the film insurance market in India is and tsunamis. Additionally, some now at INR 300 million, in terms of premium collection, and the market other potential risks like injury/ is growing at 25-30% annually. With the advent of the “100 crore club” or critical illness to the lead artistes movies where gross collection exceed INR 1 billion, a film producers are now leading to disruption or delay in opting for production policy with coverage of INR 700 million to INR 1 billion shooting are also covered by various and DLOR policy of over INR 1 billion. Typically, premiums for both policies insurers. range between INR 2.5 million – INR 3.0 million for a INR 1 billion coverage. Subsequently, Distributor’s Loss of Revenue Insurance Policy comes into effect once the movie is released. Once a film is completed, BOX the distribution and satellite rights are sold to Film Distributors (India Films released in 2017 & Overseas), including Satellite TV Hindi: 364* and online streaming right holders. Through this policy distributors Regional: 1622* safeguard their projected income. *Source: film federation of india Some risks that the policy addresses include the impact on the post- release revenues due to factors like opposition from some political/ TYPES OF COVERS AVERAGE SUM INSURED social groups, calls for boycotts/ strikes and violent protests and • Film Production Package • INR 700 million to INR 1 riots, acts of God such as floods Insurance. billion for Film Production or earthquakes. However, loss Package Insurance. of revenue due to bans by state • Distributor’s Loss of revenue governments are, in general, insurance policy. • INR 1 billion and above excluded under the policy terms. for Distributor’s Loss of However, bans by any other groups, Revenue Insurance Policy. organizations come under insured risk. DLOR is offered by insurers covering these risks. The cover commences INDIAN MARKET PREMIUM RATE before the release of the movie until 60 to 90 days after. • INR 300 million, in terms of • INR 2.5-3.0 million for INR premium collection, growing 1 billion coverage. BY MARSH INDIA FINPRO TEAM at 25-30% annually. *Source: Marsh Analysis Marsh 3 NEWS&VIEWS March 2018 GLOBAL RISK REPORT INDIA CONTEXT GEO POLITICAL POWER SHIFTS: The occurrence of an extreme weather event is the single most prominent risk the world could face in 2018, according the 13th edition of the World Major Power tensions: India and Economic Forum’s Global Risks Report, prepared in partnership with Marsh Japan are exploring more structured & McLennan Companies. The report also highlights uncertainties in the forms of strategic cooperation in global economic recovery and rising geopolitical and cyber risks as the other both economic and military affairs prominent factors likely to dominate the global risk landscape in 2018. to counter China’s efforts to press As was the case in 2017, the environment was by far the greatest concern territorial and maritime claims. As raised by experts. Among the 30 global risks the experts were asked to rank major regional powers are becoming in terms of likelihood and impact, all five environmental risks – extreme increasingly assertive of their weather; biodiversity loss and ecosystem collapse; major natural disasters; own interest, strong-state politics man-made environmental disasters; and failure of climate-change mitigation could potentially disrupt relations and adaptation – were ranked highly on both dimensions. Extreme weather between major power centers. events were seen as the single most prominent risk. CHALLENGE The report, released in January every year, shares the perspectives of global Trigger 1: The International experts and decision-makers on the most significant risks that face the North-South Transport Corridor world.In the latest edition, it cautions that we are struggling to keep up with (INSTC), which links India, Iran and the accelerating pace of change. It highlights numerous areas where we are Russia; and the Asia-Africa Growth pushing systems to the brink, from extinction-level rates of biodiversity loss Corridor (AAGC), a joint initiative to mounting concerns about the possibility of new wars.

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