When stars die, insurers count the cost

THE death of Carrie Fisher, a much-loved actor in the “Star Wars” movies, left a hole in the force for fans. It may also burn a hole in the pockets of underwriters, syndicated under Lloyds of London. They may have to fork out as much as $50m to meet Disney’s claim for its loss. The studio, which owns the sci-fi saga, had wisely taken out so-called contractual-protection insurance (CPI) in case death thwarted a contractual obligation: in Ms Fisher’s case to film and promote future “Star Wars” episodes.

Contrary to the headlines, 2016 was not an especially lethal year to be a celebrity. Like the rest of us, they do die. But unlike most of us, their employers can be left with astronomic bills. When Paul Walker, an actor in “The Fast and the Furious”, a series of action movies, died in 2013 while filming the seventh instalment, Universal Pictures had to spend considerable effort (and dollars) to make his on-screen persona live on. This included hiring body-doubles and digitally inserting Mr Walker into the movie with hundreds of computer-generated images.

Most workers are easier to replace. Employers can take out simple life insurance that pays a fixed lump sum. But the value of a film star to a studio, or a striker to a football club, is harder to calculate in advance. It depends on all sorts of things, especially timing. This is where contingency insurance, such as CPI, comes in. Unlike a life policy, how much of the $50m Disney receives depends on how it now calculates and justifies the losses caused by Ms Fisher’s death. This could include, for example, her role in boosting sales of storm-trooper figurines.

Insuring talent is becoming popular outside Hollywood. The aptly named Exceptional Risk Advisors, a company based in New Jersey that reportedly brokered the Fisher policy, also helps insure against the deaths of hedge-fund managers, company executives and sports teams’ star players. Publishers have taken out CPI in case bestselling authors die with books half-written.

Jonathan Thomas, from Munich Re, who has written contingency policies for over 30 years, says they are “exactly what Lloyd’s is good at”. The greatest change he has seen is in the sums involved. But some worry that underwriters are dropping their standards and taking on too much risk. This could well become a problem if contingency insurance grows much larger. But today it is still tiny compared with life insurance.

With rock stars remaining on stage into their dotage and long-running sequels one of the surest ways to make money in Tinseltown, the risks of losing a “key human” (or on occasion animal) are growing. That creates business opportunities for insurers, so long as they remain prudent and don’t become star-struck.