How the Insurance Business Runs Hollywood

How the Insurance Business Runs Hollywood

Slate:

Insurance is not a word usually associated with the power and glory of Hollywood - at least not to outsiders. To insiders, especially those involved in the behind-the-scenes decisions of who will be the stars and what movies will be made, it connotes a sine qua non reality of the entertainment universe. After all, once the media dressing is stripped away, what is the New Hollywood about other than minimizing risk? The stars are no exception to this rule. Sure, it may help a career to have talent, a well-connected agency, and a hot media image, but unless an actor can get insurance, he or she can't play a part in a major movie.

To begin with, movies that receive outside financing from banks or other sources - which nowadays are most movies - need a completion bond. This bond guarantees the financiers that they will be repaid the entire cost of the production (including script development, finance charges, and bank interest) if for any reason a movie loses one of its "essential elements." These elements, which often include the star and the director, are defined by the guarantor that sells the bond. In the case of Terminator 3, the producers bought a completion bond from International Film Guarantors for $2.54 million that named Arnold Schwarzenegger as an essential element. If Schwarzenegger had been disabled during shooting or had abandoned the film for any reason, IFG would have repaid the bonded cost, which was $181.6 million."