Insurance costs listed among music venues’ biggest challenges at city summit

The rising cost of liability insurance has become a substantial pain point for music venues in Austin, with attendees of the city’s recent music venue summit pointing to six-figure yearly premiums as one of their most substantial costs.

The general increase in insurance coverage – which nationally was forecast to increase 10 percent this year – showed up as a concern in two areas during the summit, with 45 percent of respondents to a city survey listing rent and affordability, including insurance costs, as their biggest business challenge. A second survey question related to the Live Music Fund saw insurance costs ranked as the No. 4 expense venues would use city grant money to cover.

Erica Shamaly, manager of the Music and Entertainment Division of the Economic Development Department, said the costs for liability coverage are becoming enough of a concern for music venues that organizations such as the Music Venue Alliance and the Texas Music Office are being looped in with local operators to look for possible solutions.

Shamaly said some operators point to Texas’ open carry gun law as a reason for the increases because of the possibility of firearms being brought into a business where alcohol is sold.

“It’s something we’re starting to hear across the board, that it’s a triple-fold threat of what’s happening in the insurance market right now. Not only is it about climate change just affecting insurance carriers across the U.S. and globally, but on top of that, you have 27 states with permitless gun carry laws now,” she said, “It’s just this perfect storm of all of these elements coming together where insurance is almost like rent and it’s getting astronomical.”

Pedro Carvalho, co-owner of the Far Out Lounge concert venue in South Austin, said the cost of the $2 million policy required by the venue’s lease has climbed to $80,000 per year.

“One of the big hurdles we’re having right now is figuring out how to cover insurance as a business, and it’s just kind of insane, and there’s not enough beer in the world to sell to cover that kind of stuff,” he said. “There’s not a big market of carriers to lower your price on insurance, because there’s only a handful of these guys, so they kind of just go up every year. To have a venue our size be insured at $2 million because our lease says we have to, it almost feels like it’s a monopoly on a thing that we can’t control.”

Andrew Parsons, co-owner of the Concourse Project dance club in East Austin, said newer venues trying to secure coverage likely will have difficulty finding a willing carrier, because most companies are unfamiliar with the economics and operations of live music businesses.

“Insurance for venues has become a big deal, because if you’re not a Live Nation or C3 (Presents), it’s more difficult to get an insurance policy for your venue. I have a guy who I’ve worked with for years doing lots of festivals, so I’m kind of lucky. But right now, if you want to get a general liability policy, they’re going to tell you to go away, or they’re going to charge you $150,000 to $200,000 a year, because after open carry laws, most insurance companies aren’t down to cover you.”

Among the other concerns discussed at the summit: the threat of new developments building near existing music venues, which can lead to disputes over noise levels. The city had tried for several years to adopt an agent-of-change policy that would build in some requirements for new construction moving into an area with entertainment venues nearby to include excess sound buffering or other preventive measures.

Shamaly said state laws covering property rights have made agent-of-change policies unlikely to include any strong requirements other than prior notification to buyers and other parties.

“We came to conclusions on what we can get done, which (are) things like disclosures, making sure that developers and brokers disclose what venues are around when they’re starting to sell and vice versa,” she said. “Communication will go a long way so that people aren’t caught off guard or surprised so they’re well aware before they purchase or rent of what’s around them.”

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