SPORTS

Games insurers go for gold

By Simon Challis
May 14, 2004 16:21 IST

Like millions of sports fans watching August's Olympic Games in Athens, insurers will be looking for world records and big medal hauls -- but success will bring tears, not cheers, from underwriters.

Why? Some teams and sponsors offer their athletes big perks if they do well, but quietly buy insurance against the risk that their charges exceed expectations, leaving them with a big bill.

A huge variety of risks -- ranging from Athens being hit by an earthquake to United States President George Bush dying during the Olympics and pushing coverage off the world's prime-time television schedules -- are covered in one insurance policy or another issued for the Games.

Though security fears were heightened by three small bombs which exploded in Athens last week and many of the venues remain building sites, insurers have staked billions of euros on the Games being a success.

"Expect the unexpected" is a maxim understood by insurers offering so-called contingency cover: Stade de France being gutted by fire or Mick Jagger getting a sore throat and being unable to go on stage.

But the demand for insurance for the Athens Olympics has taken even insurers by surprise.

Fears of a terror attack have prompted many, including the International Olympic Committee (IOC), to buy insurance for the first time against the Games being cancelled.

"Everybody with a financial stake in the Games now wants to be insured," said David Bruce, a principal underwriter at Hiscox Plc.

UNPRECEDENTED DEMAND

"Terrorism is at the front of everybody's mind," said Chris Rackliffe, managing director of insurer ASU International's London operation. "There's unprecedented demand for coverage."

By the start of the Games on August 13, $1 billion of cover will have been bought to protect against the risk of them being called off, insurers said.

That is on top of $1 billion of insurance cover bought to protect the venues, athletes, officials and spectators.

The policies range from major television networks insuring themselves for up to $350 million to Greek firms producing Athens 2004 memorabilia buying cover worth a million euros.

The price for cover has risen dramatically as insurers struggle to meet demand, says Adrian Thomas, sports insurance broker with Aon Corp.

Cover is harder to find than before as the market shrank after being rocked by a string of claims for cancelled events following Britain's foot-and-mouth crisis, the World Trade Center disaster and the SARS virus in Asia.

Though concern about a possible terror attack on the Games has risen since the Madrid rail bombings in March, insurers have gambled that the event will run smoothly.

First, the political stakes are simply too high for the Games to be cancelled, insurers argue.

Second, "it would have to be the biggest act of terrorism the world has ever seen for the Games to be called off...much bigger than September 11," said one contingency insurer.

SECURITY PLAN

The threat of an attack was "a double-edged sword," said Mike Sibthorpe, accident and financial underwriting director of Brit Insurance which has insured a number of Olympic risks, including the IOC.

"Because it's such a high-profile event it is likely to be a terrorist target. But on the other hand, the Greek and other Nato governments are determined to see it go ahead. We assume that everything that can be done to protect it, will be done," said Sibthorpe.

The billion-euro security plan for the Games involves 45,000 security officers -- three times the number used at the 2000 Sydney Olympics -- and NATO air and sea patrols.

More than half the venues, as well as major infrastructure projects including new train and tram lines, are still weeks from completion, though builders are working round the clock and IOC inspectors gave the city a vote of confidence this week.

Of all the perils that could endanger the Games, the risk that some of the venues are not finished in time is not even covered by insurers.

"We only cover events that are totally out of people's control," one insurer said.

Photograph: Reuters/Yiorgos Karahalis

Simon Challis
Source: REUTERS
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