An Example of a simple rain protection contract from MIG, structured for a 3 day music festival, took the festival organizer’s worst case profit from $60,000 and improved it to $200,000.
Event Experts LLC organizes a summer festival with top acts performing over a 3 day period. With sunny weather during the festival, attendance and revenues are strong leading to a healthy profit. However, excessive rain during the festival can significantly reduce income and even lead to a loss due to:
- Reduced ticket sales
- Reduced food, beverage and merchandise sales
- Fixed costs associated with the show such as set-ups and appearance fees
- High costs associated with rain and repairing festival site during the event.
Event Experts LLC calculate their exposure as follows:
- Sunny Day Profit: $100,000 a day
- Rainy Day Profit: $20,000 a day
- Based on fixed-costs and minimum acceptable earns, Event Experts needs to make $200,000
This chart shows the variation in revenue for the Event Experts LLC given the number of rainy days during the period.
Event Experts LLC are concerned about the fact that excessive rain cuts a hole in their earnings. Given recent historical rainfall and increased recent weather volatility, this is not a risk they want to run. Event Experts LLC decide to purchase the following protection from MIG.
Weather Insurance Contract Terms:
- Type: Rainy Day
- Period: August 1st, 2nd, 3rd
- Weather Station: Mpls/St. Paul International Airport
- Threshold: > .25 of rainfall per day
- Deductible: 1 rainy Day
- Payout per rainy day: $80,000
- Maximum Annual payout: $160,000
- Premium Cost: $20,000
This chart shows the variation in revenue for the Event Experts, LLC given the number of rainy days during the period. Profits are reduced by the premium and increased by the payouts (red).
Unprotected Best Case/Worst Case: $300,000 / $60,000
Protected Best Case/Worst Case: $280,000/$200,000
Let MIG structure a solution for your unique festival, concert, business or event, contact us today on the form below or at info@milltownrisk.com or call Dana at 612.306.1540