Olympic Games final risk management details scrutinized

Thousands of British military troops have been added to beef up security during the 2012 Olympic Games in London./ AP PHOTO

As the July 27 opening of the London 2012 Olympic Games nears, organizers and others with involvement in the games are attending to final details of managing the myriad risks surrounding such an event.

Some 10,500 athletes from 204 countries will compete in 26 sports at this year's games, which run through Aug. 12. Estimates of visitors traveling to London for the games range from 500,000 into the millions.

“As you approach game time, of course, there are security needs, as we're all well aware, and clearly in London the major security measures are being put in place,” said Ron Holton, chief risk officer at the University of British Columbia in Vancouver and vp of risk management and assurance services at the Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games.

Last week, officials asked Britain's military to provide 3,500 troops in addition to the 13,000 already planned to join private security in providing security for the London Olympics, and are employing surface-to-air missiles to address possible terrorist threats from the air.

“Security is a big risk area around any modern Olympics,” Mr. Holton said. “Aside from that, we paid a lot of attention to the potential for spectator mishaps.”

“At VANOC we put a lot of emphasis on doing loss prevention work prior to the games,” he said. Venues were closely inspected for potential hazards, said Mr. Holton. “Each morning before the venue opened for business we would have a team go through and inspect,” he said.

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“From a risk management and insurance standpoint, most people tend to look at potential risks of the Olympics with an eye towards the events and the athletes,” said Lance J. Ewing, hospitality and leisure industry practice group leader at Chartis Inc. in Memphis, Tenn. “These are formidable risk exposures including health insurance, cancellations coverage, terrorism, (kidnap and ransom), travel insurance and property coverage.”

There also are exposures surrounding the construction of event venues, dormitories and other facilities, Mr. Ewing said.

“Companies that have an interest in the Olympics as well have to identify their risks,” he said, citing the example of McDonald's Corp., which has built its largest restaurant in London's Olympic Park with seating for 1,500 diners.

“Insurance is provided by most carriers, but a fair amount of the coverage has to be pooled,” Mr. Ewing said, noting that International Sports Federations members pool for exposures such as acts of war or terrorism at the Summer and Winter Games.

Among the risks surrounding a modern Olympics, cancellation is one of the largest exposures and, consequently, cancellation coverage is likely to be among the largest insurance placements for the London Summer Olympics.

“The stakeholders, those that have the insurable interest, are numerous,” said Andrew Duxbury, underwriting manager of contingency/special risks at Munich Reinsurance Co.'s London general branch.

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At the top of those with insured interests is the International Olympic Committee, “who are the brand owner and invariably maintain the TV rights. It's they who sell the TV rights to the TV companies around the world, and that's the major driver of revenue,” Mr. Duxbury said.

The local organizing committee has its own interests such as ticket sales, as do sponsors that might be planning customer events during the games. Others include those manufacturing and selling Olympic souvenirs, “hopefully under license,” Mr. Duxbury said.

Munich Re is taking on a sizable amount of the cancellation risk surrounding the London Olympics.

“At last count, Munich Re Group's involvement is around €350 million ($430.1 million),” Mr. Duxbury said. While he wouldn't speculate on the extent of cancellation coverage in place for the London games or the percentage Munich Re is assuming, Mr. Duxbury used the 2010 World Cup as a reference point.

“We did a quick calculation for the South Africa World Cup as best we could of all the insurance interests that could be out there and felt there could potentially be a $5 billion exposure to a cancellation of the World Cup. Not all of that was insured,” he said. “I wouldn't see the Olympics as any less than that, possibly more.”

Insurers, brokers and insureds involved in the London games generally are tight-lipped about coverage that is in place. The London 2012 Organizing Committee did not respond to requests for comment, but a spokeswoman for the Lausanne, Switzerland-based IOC said the organization relies on insurance to help protect it from risks that might interfere with the games.

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“Since Jacques Rogge was elected president of the IOC in 2001, one of his priorities has been to ensure that the funding of the organization and affiliated national Olympic committees and international federations is protected in the event of unexpected events affecting the staging of the games,” the spokeswoman said.

The IOC had $415 million in insurance coverage in place for the 2008 Beijing Summer Olympics, the spokeswoman said.

“The policy is part of an overall IOC strategy to manage any risk inherent to our core business—the Olympic Games—and is part of efforts to support measures already undertaken to build financial reserves,” she said.

“The insurance policy allows the IOC, international federations and national Olympic committees to maintain operations in the event the Olympic Games should not take place,” the spokeswoman said, noting that the first games for which the IOC had such cancellation coverage was the 2004 Summer Games in Athens, Greece.

Vancouver's Mr. Holton said medical emergencies are another risk that Olympic organizers must address, an exposure that played out at the Vancouver Games with the death of Georgian luger Nodar Kumaritashvili.

“There's always a risk of serious injury or even fatality for athletes on the field of play. Unfortunately, you had that happen at VANOC,” Mr. Holton said. “Any games have to be prepared for that and also have contingency plans in place.”

The IOC requires the host committee to provide medical treatment to the Olympic and Paralympic “families,” the athletes, organizing committee and international federation members, sponsors, broadcast teams and others, Mr. Holton said.

“In our case, we bought insurance,” he said. “We also bought insurance that would cover repatriation to their home country if required.”