The glamorous film industry is underpinned by insurance
The South African film industry employs more than 25 000 people and contributed R3.5bn a year to our economy, according to an impact study released by the Department of Arts and Culture. It also provides revenue for the specialist insurance industry, beca
FAnews chatted to Paul Raleigh, head of Etana Film Guarantors, before he jetted off to the Cannes Film Festival. Raleigh produced Oscar-winning film Tsotsi, which cost R22m to make – about 4.5% of that went towards risk mitigation and insurance, Raleigh says.
How does one begin to quantify risk when it comes to producing a film? “There is a combination of factors – we look at the script, the budget and the schedule. We have to assess if there is a reasonable expectation that there will be a meeting of minds when it comes to these things,” he says. “Given the requirements of the script, is the schedule reasonable? Do we have an experienced team in place? If problems arise, how will they be managed?”
Raleigh says it’s a far cry from traditional insurance. “It’s easy to insure a car because you know what its value is. In this instance, insurance has to manage a risk once a claim comes in,” he says. “In effect, we have to try to manage risk well enough to ensure there is no claim.”
Contingency allocations
“The biggest risk to an investor is that a film will not be completed,” says Durban-based producer and director Richard Green. “At a cost, the producer will secure a completion bond and have a considerable contingency allocated in the budget to cover shortfalls during production. The bond company will also confirm to the investors that key cast and crew are in place. Film production spends millions a day for no tangible result, so these costs can escalate and spiral out of control.”
This is where Raleigh comes in – Etana Film Guarantors offer ‘completion guarantee’ protection for independently funded feature films, TV series and documentaries. This is a policy that protects the policyholder in the event that projects are not completed and delivered on schedule and within budget (for example, investors aren’t called upon for extra funding).
There are a certain number of control mechanisms that need to be in place to ensure the whole process runs as smoothly as possible.
Schedules must be signed and agreed to by the director, ensuring that shots are completed during the shoot period. Budgets and draw-down schedules are prepared by the producer and controlled by the bond company. Cost reports detail the week’s spend and the producer, line producer and bond company’s representative meet to discuss over- or under-spend. Then there are the ‘hot costs’ to consider – daily reports outline the costs that can often spiral, such as meals, fuel, extras and so on.
Weather can also be a factor, but weather insurance for an entire shoot is simply too expensive, says Green. Some locations are obviously more risky than others. “The minute you cross a border – say, into Zimbabwe or Mozambique – you’re looking at a different set of risks, all of which can cost money,” says Raleigh, pointing out that aside from having to organise travel, visas and so on, the risk of corruption is one that poses a distinctive risk. A lot of research on locations has to be conducted.
Types of insurance cover
When it comes to specific types of insurance, South African insurers can offer cover that includes vehicle rentals, the safety of equipment, any public liability damage, and film producers’ indemnity.
Raleigh says it’s possible to work on about 20 film projects in a year, with shooting ranging from four to eight weeks, and pre- and post-production also taking a number of weeks. “You can look at four months’ prep for a massive-budget production,” he says. “We generally underwite the projects ourselves because if we had to give a large percentage of our premiums to other underwiters we wouldn’t make a profit. It depends on the budget, but if a project comes in under R10m, we’re our own underwriters. It’s a risk – but we make sure we manage that risk. It’s part of the job.”
South Africa is becoming an increasingly popular destination for overseas film-makers, which could open doors for local insurers who can cash in on the opportunity. “Generally, people do their homework and realise we’re a good destination – we’re not that risky compared to many others,” says Raleigh.
Editor’s thoughts:
A film set poses a set of unique challenges to the insurance industry as it is exposed, moving and ever-changing. It requires objective, specialist risk management that has to focus on factors that are not obvious – other forms of business insurance, by contrast, contend with fixed locations, physical security, specific objects and so on. Do you think there are opportunities for local insurers to ‘get in on the act’? Comment below or email [email protected].
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