What is Loss of Attraction Insurance?

Loss of Attraction Insurance, also known as Loss of License or Loss of Key Amenity Insurance, protects businesses against financial losses resulting from the temporary or permanent loss of a key attraction that drives customer visits and revenue.

This insurance recognizes that certain businesses rely on specific features or licenses to attract and retain customers. When these attractions are lost—whether due to regulatory action, damage, or unforeseen circumstances—the business faces significant revenue decline even if operations continue.

The insurance provides financial compensation to cover lost profits, ongoing expenses, and other financial impacts during the period when the attraction is unavailable or permanently lost.

Key Types of Attractions Covered

Loss of Attraction Insurance can protect various business-critical features:

• Entertainment Licenses: Nightclub entertainment licenses, live music permits, gaming licenses, and cabaret licenses that are essential to operations
• Key Personnel: Celebrity chefs, renowned entertainers, or key staff members whose presence drives customer visits
• Facilities & Amenities: Swimming pools, spa facilities, golf courses, bowling alleys, or other recreational facilities
• Attractions: Theme park rides, exhibits, or signature features that draw visitors
• Licenses & Permits: Alcohol licenses, food service licenses, or other regulatory permits critical to operations
• Contractual Rights: Exclusive supply agreements, franchise rights, or distribution contracts
• Reputation & Brand: Protection against loss of reputation or brand damage affecting customer attraction

Industries Most Likely to Need Loss of Attraction Insurance

Certain sectors face higher risks of losing key attractions and therefore benefit most from this coverage:

Hospitality & Entertainment

Hotels, resorts, and restaurants with signature amenities or celebrity chefs rely on these features for competitive advantage. Loss of a Michelin star, celebrity chef, or luxury spa could significantly impact bookings and revenue.

Leisure & Recreation

Theme parks, golf clubs, bowling alleys, and sports venues depend on specific facilities and attractions. Closure of a major ride, golf course damage, or facility unavailability directly impacts visitor numbers.

Nightlife & Entertainment Venues

Nightclubs, bars, and cabaret venues rely heavily on entertainment licenses and live entertainment. Suspension or loss of these licenses can make the venue unable to operate profitably.

Retail & Specialty Businesses

Businesses with exclusive distribution rights, franchise agreements, or unique product offerings face significant losses if these arrangements are terminated.

Professional Services

Medical practices, dental clinics, and professional firms may lose key practitioners or professional licenses that are central to their business model.

What Does Loss of Attraction Insurance Cover?

Coverage typically includes financial losses resulting from the loss of the insured attraction:

Lost Profits & Revenue

The primary coverage compensates for lost gross profit during the period the attraction is unavailable. This is calculated based on historical trading records and projected revenue loss.

Ongoing Operating Expenses

Fixed costs that continue even when revenue declines are covered, including rent, utilities, insurance premiums, staff salaries, and loan repayments.

Increased Costs of Working

Additional expenses incurred to mitigate losses, such as temporary staffing, emergency repairs, or alternative arrangements to maintain business continuity.

Temporary Relocation Costs

If the business must temporarily relocate or operate from alternative premises, associated costs may be covered.

Reinstatement & Restoration

Some policies cover costs to restore or reinstate the lost attraction, such as reapplying for licenses or rebuilding damaged facilities.

Common Causes of Loss Covered

Loss of Attraction Insurance typically covers losses resulting from:

• Regulatory action or license suspension/revocation by authorities
• Physical damage to key facilities or attractions
• Illness, injury, or death of key personnel
• Termination of exclusive contracts or agreements
• Loss of professional licenses or certifications
• Forced closure due to health & safety violations
• Loss of franchise or distribution rights
• Reputational damage from specific insured events
• Unforeseen circumstances affecting key attractions

What is NOT Typically Covered

It's important to understand exclusions and limitations:

• Pre-existing Conditions: Known issues or pending regulatory actions before policy inception
• Intentional Actions: Losses caused deliberately by the business owner or management
• Regulatory Penalties: Fines, penalties, or sanctions imposed by authorities
• Market Changes: General market downturns or loss of customers due to competition
• Pandemic/Epidemic: May be excluded or subject to specific conditions
• War & Terrorism: Losses from war, civil unrest, or terrorist acts
• Gradual Decline: Slow loss of customer interest or reputation deterioration

How Loss of Attraction Insurance Works

Understanding the claims process helps businesses prepare:

Step 1: Policy Underwriting

During underwriting, insurers assess the business, key attractions, historical revenue, and risk factors. They establish a baseline of normal trading performance and identify what constitutes a covered loss.

Step 2: Loss Event Occurs

When a covered event causes loss of the insured attraction, the business must notify the insurer promptly and provide documentation of the loss.

Step 3: Claims Submission

The business submits detailed claims documentation including financial records, evidence of the loss, and calculations of lost revenue and ongoing expenses.

Step 4: Assessment & Settlement

The insurer assesses the claim, verifies losses, and calculates compensation based on the policy terms and actual financial impact.

Key Policy Considerations

When selecting Loss of Attraction Insurance, consider these important factors:

Coverage Limits

Ensure the policy limit reflects potential revenue loss. This should be based on detailed financial analysis of what the business would lose if the attraction became unavailable.

Waiting Period (Deductible)

Most policies include a waiting period (typically 7-30 days) before coverage begins. This reduces premiums but means initial losses are uninsured.

Indemnity Period

This is the maximum period for which the insurer will pay claims, typically ranging from 12 to 36 months depending on the policy.

Definition of Loss

Carefully review how "loss of attraction" is defined. Ensure it covers the specific scenarios your business faces.

Exclusions & Conditions

Understand all exclusions, conditions, and requirements for maintaining coverage, such as maintenance obligations or regulatory compliance.

Cost of Loss of Attraction Insurance

Premium costs vary based on multiple factors:

• Nature and criticality of the insured attraction
• Historical revenue and profitability
• Coverage limits and indemnity period
• Waiting period/deductible selected
• Industry and associated risk profile
• Business track record and claims history
• Risk mitigation measures in place

Premiums typically range from 1-5% of the annual coverage limit, though this varies significantly based on risk assessment.

Risk Mitigation Strategies

Beyond insurance, businesses should implement strategies to reduce loss of attraction risks:

• Regulatory Compliance: Maintain full compliance with all licensing and regulatory requirements
• Facility Maintenance: Implement rigorous maintenance programs to prevent damage or closure
• Staff Development: Develop backup talent and cross-training to reduce dependency on key personnel
• Contract Management: Carefully manage exclusive agreements and maintain good relationships with partners
• Diversification: Develop multiple revenue streams to reduce reliance on single attractions
• Insurance Integration: Combine Loss of Attraction Insurance with Business Interruption Insurance for comprehensive protection

Loss of Attraction Insurance vs. Business Interruption Insurance

While related, these are distinct coverages:

Business Interruption Insurance covers losses from physical damage to business premises (fire, flood, etc.) that forces temporary closure.

Loss of Attraction Insurance covers losses from loss of specific attractions or amenities that drive customer visits, even if the business remains physically operational.

A business might have both coverages: Business Interruption for physical damage scenarios and Loss of Attraction for loss of key features that reduce customer appeal.

Is Loss of Attraction Insurance Right for Your Business?

Consider this insurance if your business:

• Depends heavily on specific amenities, facilities, or attractions for customer visits
• Relies on entertainment licenses, professional licenses, or regulatory permits
• Has key personnel whose absence would significantly impact revenue
• Operates in hospitality, leisure, entertainment, or specialty retail sectors
• Would face substantial financial hardship if key attractions became unavailable
• Has significant fixed costs that continue regardless of revenue
• Wants comprehensive protection beyond standard business insurance

Getting Loss of Attraction Insurance

To obtain this specialized coverage:

1. Assess Your Needs: Identify which attractions are critical to your business and quantify potential revenue loss if they became unavailable.

2. Gather Financial Data: Prepare detailed financial records showing historical revenue, profit margins, and operating expenses.

3. Document Key Attractions: Provide comprehensive information about insured attractions, including their importance to revenue generation.

4. Consult Specialists: Work with insurance brokers experienced in Loss of Attraction Insurance to find appropriate coverage.

5. Review & Compare: Carefully review policy terms, exclusions, limits, and conditions before committing.