With nearly $2 billion at stake, it’s no surprise that insurance professionals will be keeping their eye on the ball as the biggest event in soccer kicks off this month.
Andrew Duxbury, an underwriting manager for special risks with
Munich Re who has handled event cancellation insurance for the Olympic Games and the World Cup in the past decade, said each city faced different risks in handling major events.
Duxbury says total event cancellation insurance coverage for this year's World Cup “will be about $2 billion,” which would cover the cost of ticket refunds and hotel cancellations and losses at television stations if matches were called off.
Insurers offering event cancellation insurance will be wondering if the World Cup can go ahead as scheduled; and in Brazil, one of the risks that could result in match cancellation or postponement may come from traffic jams.
With matches located in 12 cities throughout the country, it will be a challenge for soccer stars and their supporters to make it to the venues.
Concerns about gridlock are nothing new. At the 2012 London Olympics, traffic jams occur on an ordinary day in that nation’s capital. But all went smoothly for the summer games.
At the 2008 Beijing Olympics, concerns about earthquakes went unfounded – as opposed to the 2011 rugby World Cup here in New Zealand, which required the relocation of games after the Christchurch earthquakes, which triggered insurance claims.
Event cancellation insurance emerged in the late 1960s, when television broadcasts of sporting events became popular. This year's World Cup is expected to be watched by more than a billion spectators worldwide.
The television stations that pay millions of dollars for the rights could seek compensation from the organizers if matches are postponed or cancelled, with advertisers filing claims with the stations for refunds.
Munich Re's exposure to event cancellation insurance for the Brazil World Cup is $435 million, which is higher than the $381 million for the World Cup held in South Africa in 2010.
Cancellation insurance probably a safe bet? To date, only one Olympic Games triggered insurance claims, but it had nothing to do with traffic or earthquakes.
The 1980 Moscow Games gave rise to claims when the United
States led other countries in a boycott after the then Soviet Union invaded Afghanistan.
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