With the drop of Kanye West’s microphone followed by a dazzling fireworks display, the Pan-Am Games came to a spectacular close in Toronto. But at $2.5 billion, the competition came in much higher than its initial estimated budget of $1.4 billion.
While it’s unclear how much of the overblown budget was directed toward liability insurance, the sum was undoubtedly substantial. As the city now begins to buzz with rumors of a potential bid for the 2024 Summer Olympics, many question whether that would also rack a high insurance bill.
Although Toronto has yet to formally apply as a candidate, a look at Boston 2024’s previously proposed insurance budget reveals what it could cost, if the Ontario city is elected as host of the Summer Games.
Boston is now out of the runnings, but its bid committee had set the bar high by advancing the “most insured games ever,” which would have entailed $128 million in premiums for up to 25 different policies.
Moreover, the city planned to procure $475 million for cancellation coverage, $2 billion for surety and performance bonds guaranteeing cost and a “timely performance” in venue construction, and $50 million to $100 million covering sponsors who fail to pay.
Boston 2024 also consulted with the top 10 international insurance brokers for the event, hoping to find one broker who could procure all policies needed for the game.
Such heavy coverage and intensive risk management procedures would not only keep the event running smoothly, but protect taxpayers from any overruns – a problem plaguing many recent Olympic Games.
“We have been studying every single exposure. What we’re looking at is making these the most insured games ever,” said Meghan Burke of the law firm Mintz Levin, which was brought on to handle insurance negotiations for Boston 2024. “It’s a top priority here that we don’t expose the public to needing to make any expenditures because of these obligations.”
The cost of insuring an Olympics competition has risen dramatically throughout the years, with Vancouver paying $500 million for the Winter Games in 2010, according to
The Globe and Mail.
“The income generation that the Games produce is greater and greater as time goes on,” said Tom Phillipson, head of special risks at
Swiss Re, an insurer with more than $100 million in exposure to the Games, told the outlet. “Organizers are more intent than ever to transfer some of that risk into the insurance market.”
Much of this increase is attributed to the deepening impact of an Olympics cancellation, which could result in more than $5 billion in losses. In addition, extreme weather and political uncertainty adds complex risk factors to the equation.
Still, many proponents believe that the benefits of hosting the Summer Olympics in Toronto far outweigh any disadvantages, especially since infrastructure costs would be minimal with all the new structures built for the Pan-Am Games.
“This is the momentum we needed to talk seriously about this,” said COC president Marcel Aubut.
