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Insurance may not respond in FIFA World Cup scandal

Posted On: Jun. 5, 2015 12:00 AM CST

Insurance may not respond in FIFA World Cup scandal

International soccer organization FIFA has $900 million in event postponement/relocation insurance for the 2018 World Cup games in Russia, but the coverage may not respond if the games are moved as a result of the Fédération Internationale de Football Association's corruption scandal, sources say.

U.S. federal prosecutors last month indicted 14 soccer and marketing officials, including nine FIFA executives, for allegedly arranging bribes to award contracts, among them the choice of South Africa to host the 2010 World Cup.

U.S. and Swiss authorities continue to investigate Zurich-based FIFA's selection of Russia and Qatar for the 2018 and 2022 games, respectively, according to news reports.

A FIFA spokesman said Friday that the organization does not expect changes to its event schedule because of the criminal probes.

“Our tournaments and other activities are all progressing as planned,” he said in a written response to questions.

FIFA has already placed $900 million in coverage for costs of “postponement and/or relocation” of the 2018 World Cup, according to the organization's 2014 financial report. Covered risks include “natural catastrophe, accidents, turmoil, war, acts of terrorism, nonparticipation of teams and epidemic diseases,” the report says. The insurance does not cover cancellation of the event, which FIFA would cover from its own reserves, according to the report.

The FIFA spokesman declined to provide other details of the program or identify participating insurers.

It's uncertain whether the program would respond, though, if investigators find evidence of wrongdoing in Russia's selection as the 2018 host and FIFA decides to relocate the World Cup to another host nation, sources suggest.

Generally, event cancellation policies cover only losses from a cause that is beyond the control of the policyholder, noted a spokeswoman for Swiss Re Ltd. in Zurich on Friday. The policies also typically exclude losses arising from fraud, she added.

“I could certainly see an insurer saying (to FIFA), 'You created these issues by putting people in charge who allegedly were not doing things above board,'” said Jeffrey L. Schulman, managing partner at The Law Offices of Jeffrey L. Schulman P.C. in New York, on Thursday. Insurers may tell FIFA, “We are not insuring you for the wrongful conduct of your executives,'” said Mr. Schulman, who is familiar with event cancellation coverage issues.

The Swiss Re spokeswoman would not comment on whether Swiss Re is participating on the 2018 World Cup program.

Swiss Re and Munich Reinsurance Co. have both insured previous World Cup risks, with Munich Re assuming $350 million in event cancellation exposure for the 2010 games, according to the companies' own publications. Munich Re representatives could not be reached for comment.