Event insurance
Shifting an event like the World Cup is no easy matter, however. Hosting
it requires adequate stadium capacity, transportation and accommodation for players and fans alike. There is also the matter of TV coverage. estimated one billion people, with hundreds of media companies involved and billions of dollars in commercial television rights.
Sportscover’s Nash, however, says that a move in venue would not be a catastrophe—as long as it’s done early.
“The World Cup is the largest sporting event held in the world. Consequently any cancellation or change in host country would have repercussions. If the event was moved the main factor would be the notice period.
“As it is not scheduled to take place until 2022, there would be time for
alternative arrangements to be made, particularly if the event went to a country which already had the infrastructure to hold the event.
“The main issue with broadcasting companies is time zone. TV companies (and the advertisers) want the matches to be screened at the best possible time for audiences to achieve maximum advertising revenue and recoup some of the huge sums of money they bid to televise the matches.
“As the event gets nearer the opportunity of switching to an alternative with FIFA, the local organisers and many other sponsors would take out moving of the World Cup.”
However, Nash adds, the worst case scenario is where the event cannot be held because of some major event, such as terrorism or a natural catastrophe, but cannot be moved because of the short notice. This would and sponsors and would ultimately fall back on the insurers who provide cancellation insurance.
The issue of cancellation insurance has been raised by more than one
insurer. David Boyle, class underwriter at Argo Global, which is a part of Bermuda-based specialty insurer Argo Group, commented in an online note on this issue that: “The potential loss to businesses across the globe and particularly within the host countries, should the 2022 World Cup not take place as planned, would run into billions of pounds.”
However, according to Boyle, the impact of a World Cup cancellation on the insurance market would likely be far less severe. While some insured event promoters or companies may have purchased contingency policies that cover all events beyond their control, the standard exclusions against criminal acts will mean that any losses resulting from a bribery case, for example, will not be covered.
“Many risk managers likely will re-examine their event cancellation policies to determine their exposures,” he concludes. “Media speculation may lead to an uptick in enquiries, as is often the case following events that bring attention to a certain type of insurance coverage.”
52 | INTELLIGENT INSURER | November 2015
“It will be interesting to see whether international reinsurers have the risk appetite to take large lines on an event which is developing and potentially changing at a moment’s notice.” Chris Nash, Sportscover
UNDERSTANDING THE RISKS “There may be some reluctance by insurers to take part of the risk,” Nash comments. “It is likely that the insurance will be placed but the premium may increase because of the controversy.
“Insurance is about understanding and examining the risk and determining the correct premium for the risk. If there had been no controversy and the possibility of the World Cup being moved had not been so active a topic, the risk would certainly have been lower and that would have resulted in a lower premium. If the controversy remains and there are still calls to move the event as we get closer to 2022, insurers will become far more nervous
Another issue for the location of the 2022 World Cup is its place in
relation to political events—and to terrorism. The Middle East is still dealing with the rise of so-called Islamic State and there is also the issue resolved by 2022 is beyond the scope of this publication.
According to Sportscover’s Nash, insurance companies will be worried about the dangers of terrorism at the event. He points out that this is true of any major event and that unfortunately we live in times where terrorist organisations want to create as much havoc and misery as possible, making large sporting or entertainment events a potential target.
“Will this be heightened because the event is in the Middle East?
and political issues progress over the next few years.”
see how the insurance market deals with Qatar 2022. It is a huge event and insurance for the event will run into several billions of dollars.
“The local insurance market is small and the international reinsurance
markets will have to provide the capacity, as they usually do for such a major event. It will be interesting to see whether international reinsurers have the risk appetite to take large lines on an event which is developing and potentially changing at a moment’s notice. I don’t expect cover to be cheap!”
www.intelligentinsurer.com
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