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15 June 2018Insurance

FIFA World Cup poses significant challenges for insurers

The 2018 FIFA World Cup in Russia involves a number of significant risks for those involved, including the World Football association, FIFA, organisers in Russia, sponsors and broadcasters, along with the football players and fans.

This is according to Allianz Global Corporate & Specialty, which has been investigating risks in Russia and negotiating insurance policies for a number of years.

"Every sporting event involves a number of risks. These can be large or small, expected or unexpected. There is only one certainty: No one could handle these multiple risks on their own," explains Michael Furtschegger, head of entertainment international at AGCS. "Without insurance, there would be no World Cup, no Olympics and probably no organised competitive sport at all."

For example, if there was a simple power failure or transmission error and the opening ceremony or the final were to be delayed for just a couple of minutes, advertising slots on TV channels would be cancelled, bringing in losses worldwide.

Weather events, natural disasters, epidemics or terrorist attacks could also cause a major sporting event to be postponed, or in the worst case scenario, cancelled, AGCS noted.

“For Russia, hooliganism and terrorism are key risks, while the Zika virus was the major threat in Brazil four years ago,” Furtschegger added. Travel and health risks for individuals are common too, causing potential liability claims for the event hosts. For example, a hooligan could hurt a spectator, a fan could suffer injury from poor safety precautions or a player could face the end of their professional football career because of a foul.

For the 2018 World Cup in South Africa, Lloyd’s estimated the insurance value at around $9 billion, including $4.8 billion for stadiums and training facilities alone.

"These sums of insurance are likely to be exceeded in Russia this year, given the high level of investment," said Furtschegger.

Reports suggest that Russia’s confirmed spending on the World Cup totals around $12 billion, which does not even include construction and renovation costs for stadiums and infrastructure.

As well as covering the standard property and liability risks involved in major sporting events, there are more bespoke insurance coverages - for example prize-indemnity or over-redemption policies, which cover financial expenses after unexpected sporting successes.

An electronic retailer would have to foot high costs if it has linked financial discount or refund promotion to the victory of the national team and then this actually happens. National teams also use financial buffers for contractually-agreed bonus payments to players.

"In the surprise event that a team such as Nigeria makes it to the final, there would probably be high bonuses due to the players that could exceed the financial capabilities of the national football organisation. Here individual insurance solutions are possible," explained Furtschegger.

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