Insuring the Olympic Games: Major Risks, Much Secrecy, Heavy Coverage

100 days to go before the 2012 Olympic Games open in London. As that day moves closer, preparations, which have been going on for some time, speed up. Today’s ceremony in a rainy Kew Gardens, presided over by Committee Chairman and former Olympic Champion Sebastian Coe, unveiled the official games motto: “Inspire a generation.”

One of the most inspired groups preparing for the event has been the City’s insurance community. Brokers and carriers have been heavily involved from the beginning, as there are many risks in hosting a competition that goes on for three weeks, attracts thousands of athletes and visitors, and is watched by millions more around the world.

Unfortunately, individual details are hard to obtain, as the brokers – Marsh is the lead broker – and the carriers are reluctant to provide specific information, and have usually agreed with their clients not to do so. In most case they have also been required to sign “gagging orders,” pledging their confidentiality on games coverage.

In effect the type of coverage involved and the risks posed, as well as other details, are not commonly disclosed for policies covering major sporting events. “The information we receive from our clients is highly confidential,” said Hiscox event underwriter Elizabeth Seeger.

She explained that even though the Olympics are the biggest global sporting event, along with the Football (soccer) World Cup, they are handled in the same manner as other high profile public events. “Clients require confidentiality for a number of reasons,” Seeger said. These can include a reluctance to make public the amounts involved in becoming a sponsor for such an event, as well as the details of their insurance coverage, which, she stressed, is an absolute requirement.

In addition publicizing an insurance policy could lead to opportunist claims from third parties. While some may be legitimate, many are filed simply as a means to obtain money. “It is important for all involved that we keep that door firmly closed, as making this type of information public will not assist in the running of the event or be of benefit to those involved,” said Seeger.

While the carriers and brokers may treat coverage of Olympic events more or less as they would other sporting contests, there are differences. An event that goes on for nearly three weeks in more than 60 different sites, involving thousands of athletes and spectators, does pose additional problems. However, the types of coverage required do fall into familiar categories, and the London market is well prepared to deal with them.

Coverage comprises three main categories: liability, event cancellation and property damage. Each sector covers the specific risks that are involved, and in some cases they overlap.

Liability is pretty straightforward. Moving and accommodating all of the athletes and spectators, as well as the officials and other personnel involved in managing the games is a huge challenge. London’s budget for the games is a whopping £9.3 billion ($14.843 billion). There will be injuries and perhaps even fatalities, as well as non-personal injury claims.

Event cancellation coverage is more complicated. “Anyone involved with the games would have obtained |this type of] coverage years ago,” Seeger said. Thus many policies have been in force since 2005, when London was awarded the 2012 Olympics. “The earlier the better,” she continued, “as the terms are broader and less restrictive [in the early stages].

“Risk management is the key to the success of any event; that is why, when we talk to potential clients, we would advise them on how crucial a robust contingency plan can be,” she continued.  “Planning for the worst can go a long way in helping event organizers secure the type of insurance coverage they need and insurers should be able to guide them on creating an appropriate plan.”

Event cancellation can cover the costs incurred when a planned event is actually cancelled, which is relatively rare, as they are usually rescheduled. But the costs of rescheduling, including such items as new programs, tickets, rental costs, crowd control, etc. are nonetheless expensive and are covered by policies. “As a result we always encourage our clients to have a contingency plan in place,” Seeger said.

Property damage polices cover the buildings, the outdoor sites, the equipment and the transport vehicles used to stage events. They are at risk from both fire and construction defects, as well as theft and vandalism.

The perils that these policies cover run the gamut from slip and falls to terrorist attacks. Seeger described terrorism as “very high risk.” The games are a potential target for every disaffected group or individual on the planet. One only has to remember the murderous attack on the Israeli Olympic team in Munich in 1972 to realize how great a threat a terrorist act could be. “Such an act would probably trigger all of the policies involved,” Seeger said.

She also noted that in addition to a planned or organized attack, there’s also the possibility of civil unrest, such as the riots that occurred in London and other UK cities last summer, which could affect Olympic events. A number of activist groups have also indicated that they plan to stage protest marches and demonstrations at various game sites, which would also involve insurance coverage.

“Our other major concern,” Seeger said, “is the possibility of an outbreak of disease, which could be spread rapidly with all of the air travel.” She cited the SARS outbreak as an example of the type of sickness that could greatly interfere with the Olympics. As the games will bring together large numbers of people in closely packed stadiums, they would provide an ideal incubator for the spread of any infectious disease.

Another concern is the likely boycott of the products of some companies who are Olympic Games sponsors by groups who object to such products or the procedures employed in their manufacture. There are also potential disputes over broadcasting rights to the games that have been taken up around the world.

Finally there is the newest nasty kid on the block – cyber terrorism. “All they would have to do is hack into the system to create a real problem,” Seeger said. There have already been several computer glitches involving tickets, although no one has ascribed them to hackers. But, if someone put a malign virus into one of the systems controlling the games, it could disrupt ticket controls and timing mechanisms. A virus could also potentially scramble global communications, including TV and Internet feeds, as well as cell phones and related devices.

All in all insuring the Olympics is an Herculean task, but the London market is ideally placed to deal with all of these potential problems, and they have already gone a long way into doing so.