Civil unrest in Brazil highlights World Cup's numerous insurance risksReprints
Civil unrest in Brazil that could disrupt the World Cup is among top worries of organizers and insurers as the June 12 start of the much-anticipated soccer tournament quickly approaches.
Billions of dollars of insurance in place for the prestigious tourney includes coverage for cancellation of the sporting event, the salaries of players who suffer serious injuries, third-party liability for spectator injuries, as well as pandemics and communicable diseases.
Recent rioting by Brazilian citizens protesting the overall cost of the World Cup, among other complaints, has raised concerns about potential disruption or cancellation of the soccer games to be held in 12 cities over a month, insurance industry sources said.
Event cancellation and contingency policies likely would include coverage for riots and civil commotion, the sources said.
Completing massive infrastructure projects to host the games is another major concern, and at least one stadium is unlikely to be completed in time for this week's kick-off, sources said. Construction reportedly continued at a feverish pace last week.
However, the sources said venue readiness is a risk that would be excluded from contingency insurance which covers event cancellation.
Zurich-based Federation Internationale de Football Association, the local organizing committee, television companies, sponsors and advertisers are among those that have purchased cancellation or abandonment insurance.
The July 13 final is expected to be watched by a live TV audience of about 1 billion, which would make it one of the top 5 most-watched events in television history.
Among insurers covering the global soccer spectacle are Munich Reinsurance Co., which has financial exposure to the complete cancellation of the event of about $400 million, and Swiss Re Corporate Solutions, a unit of Swiss Re Ltd., which has exposure to the cancellation of the event in the hundreds of millions of dollars.
Many Lloyd's of London companies also have underwritten World Cup-related insurance, sources say.
Insurance for global sporting events typically is arranged up to six years in advance, often as soon as a host city or country is announced.
Andrew Duxbury, underwriting manager at Munich Re in London, said while the threat of terrorism at the Brazil World Cup may not be perceived to be as great as it was at the 2012 London Olympic Games or the 2014 Winter Olympic Games in Sochi, Russia, underwriters still factored it into its rating and coverage decisions.
While Brazil is not as prone to earthquakes or hurricanes as Sydney and Beijing, which recently hosted Olympic Games, storms and flooding could affect individual matches, Mr. Duxbury said.
Other key risks considered by event organizers and underwriters include pandemics, but the threat has lessened as the start date approaches, said Sonja Kaufmann, Zurich-based senior contingency underwriter at Swiss Re Corporate Solutions.
While Brazil may represent a better catastrophe risk for underwriters than other recent World Cup host nations, such as Japan, the threat of riots is greater than other recent host nations, said Elizabeth Seeger, personal accident and contingency line underwriter at Hiscox Ltd. in London.
Large and sometimes-violent protests have occurred in Brazil in recent months, in part because of World Cup-related costs.
Coverage for terrorism, riots and civil commotion typically is included in contingency insurance, but such threats were considered a much smaller risk when the coverage was underwritten several years ago, said Chris Rackliffe, a contingency underwriter at Beazley Group P.L.C. in London.
After the cancellation risk, the likely No. 2 risk connected with a World Cup is player injuries, said Richard Tolley, sports and events practice leader for Europe, Middle East and Africa for Marsh Ltd. in Birmingham, England.
They are “the elite of the elite,” he said, and are highly paid by their clubs. Their future potential earnings are at risk should they be seriously injured during a tournament, he said.
Earlier this year, FIFA extended insurance, first arranged in 2010 after Bayern Munich star winger Arjen Robben was injured during a friendly match in the Netherlands and and was unable to play in the 2010 World Cup.
The coverage, which is unusual for a sporting event, would compensate clubs for part of a player's salary should the player be injured during the tournament and be unable to play for their regular team, Mr. Tolley said.
It includes an annual payout of up to $9.7 million per player, depending on that player's contract with his club, sources said.