The UK gaming sector is growing rapidly, and lockdowns and the rise of esports have both played a part in this. It’s now considered mainstream entertainment, with new technology making it globally accessible. Of course, this greater success brings with it greater risk.

As independent insurance specialists, we handle the cover for games development studios of all sizes. That’s why we understand the challenges you face and how difficult it can be to protect your business while meeting certain obligations.

We also know that no two games are the same, so it’s important to get a tailored insurance package that’s right for you. Read on to learn what to look out for when seeking coverage for your studio.

Policies to consider

Games developer insurance isn’t cheap, but the right cover can prove invaluable and potentially keep your studio in business should things go wrong.

There are many different policies out there, from liability cover to property and management protection. But if you’re a games developer, we suggest focusing on the following as a minimum:

Professional Indemnity (Errors and Omissions)

This defends your studio against allegations of negligence, errors and omissions. Should you lose a claim, it also pays any costs awarded against you, be it damages or legal expenses for the other party. Comprehensive cover includes:

• Breach of contract – failing to deliver the game within an agreed timescale.
• Intellectual property (IP) infringement – facing third-party accusations of alleged design infringement (this could be as simple as creating a character that’s similar to an existing one).
• Breach of confidentiality – inadvertently breaching confidentiality on upcoming games or launches, resulting in expensive litigation.

Cyber & Data

Privacy protection, hacker damage and data breach costs are all particularly useful parts of this policy. But there are a couple of additional covers worth knowing about:

Cyber extortion – If you face a ransomware threat, insurers can step in and fix the problem. This is especially important for games developers that need to deliver content within specified timescales, and will protect against the potential fallout if third-party intellectual property is leaked.

• Cyber business interruption – This is a relatively new area of cyber cover that was previously only available on a small number of policies. It can step in to recover any potential loss of earnings as a direct result of an attack, or pay additional costs (such as for extra resources) to get you back on track to delivering a project on time.

Contractual requirements to think about

Whether you’re creating gaming elements for a third-party studio, independently designing your own intellectual property, or being funded by a publisher for a commissioned development, you’ll often have strict contractual requirements relating to insurance. These can involve:

• Type of policy you should have
• Limit of insurance
• Length of time you should hold this limit of insurance
• Jurisdiction of the contract
• Additional requests (such as noting a third party as an additional insured)

US companies can have strict and often onerous contractual requirements with little room for manoeuvre. For that reason, it’s vital you work closely with your broker or provider to ensure your coverage offers the right protection.

Why you’re seen as high risk

When an insurer classes you as ‘high risk’, it can be difficult to find standard, off-the-shelf cover. There are several reasons why games developers are put into this category, including:

• Worldwide distribution of games (including the US and Canada in particular)
• IP infringement exposures, from artwork through to the coding itself
• Contractual clauses such as US jurisdiction and the publisher to be an additional insured
• Strict confidentiality stipulations, especially from large US publishers
• Highly litigious sector
• Complexity of projects and often time-critical nature of deliverables to tie in with release dates and events
• Licensing agreements needed for games developed with content in the sports or vehicle industries

The rising popularity of esports, online multiplayer gaming and influencers has driven further money into games development, causing increased risk to the studios that create them. This means litigation to protect these assets has also gone up, in particular around intellectual property.

As a result, only a certain number of insurers will quote to cover games developers, and this number reduces if the game is licence-heavy or subject to onerous contractual terms. What’s more, few provide the level of protection we recommend you have.

How to counteract this

Fortunately, there are some insurers who offer a comprehensive package and are comfortable with games development risks – you just need to make sure this is presented in the right way. We usually request:

• A completed proposal form
• A synopsis of the games being developed
• A copy of the contracts

Many developers use skilled subcontractors to help with certain projects. If this is the case with your studio, we strongly recommend making sure these contractors have their own insurance in place (and that you record this information) to offset any additional threat. There are also a few steps you can take to ensure risk management procedures are set up regarding IP and licensing.

Other things to bear in mind

Whilst you can transfer a huge element of your exposure to insurance, there are other details you need to consider:

• Loot boxes – Games that involve loot boxes are on the cusp of gambling so could fall under gambling regulations. These are seen as very high hazard and are usually excluded as standard.
• Excess levels – Excesses can often be higher under US jurisdiction, so it’s vital you understand what your levels are and how that first payment could affect your cash flow.
• Aggregate or ‘any one claim’ limits – An ‘any one claim’ basis is when your limit resets after each payout, so you have the whole limit of cover again. Aggregated limits, however, are for the total of all claims made during the policy period. This means a large payout could exhaust your cover and leave you exposed going forward. Cyber & Data policies under US jurisdiction are usually aggregated limits, so consider the impact of multiple claims when choosing an appropriate amount to cover your studio.
• IP protection, defensive only – This type of policy steps in should someone allege that you infringed their IP, but it doesn’t provide cover to pursue others for infringing yours. That would need to be quoted as a separate product, usually at a higher premium and requiring a lot more information.

What RiskBox can do for you

We’ve provided a number of things here for games developers to consider when taking out insurance. But we know it can be difficult to get your head around, so that’s why the RiskBox team is always on hand to help you secure the appropriate protection for your business.

With our knowledge and expertise, we can make the process as simple and pain-free as possible. If you’d like to know more about how we can support you, get in touch today. You can call us on 0161 533 0411 or fill in our online contact form and we’ll get straight back to you.

Photo by Florian Olivo on Unsplash