Know the Score
The risks involved in sporting events require brokers who are ahead of the game
We’re talking, of course, about the FIFA World Cup that wrapped up last month. A record 715.1 million people watched Italy beat France at the 2006 final. This year, even more viewers were tuned in thanks to the Internet streaming and mobile apps, and this billion-dollar industry is booming for all those involved.
In fact, the cost of insuring the 2010 football (or soccer as it’s commonly referred to in North America) event was pegged at about $9.5 billion (CAN), including stadiums, competitions, and prizes, according to London-based insurer Lloyd’s.
Broadcasting rights are also included in this figure. In the 2006 tournament, FIFA stated it earned $2.7 billion (US) for broadcasting almost 100 hours of live soccer around the world. The 2010 World Cup’s insurance coverage of $650 million (US), which included cancellation of the games due to acts of terrorism, natural disasters, war or accidents, is not surprising. Munich Re is reported to have secured the largest share of this policy at $350 million (US), according to a report in The Wall Street Journal.
However, the $9.5 billion (CAN) in insurance coverage doesn’t include athletes, and a player at the height of his career could be insured for about $76 million (CAN), states Lloyd’s.
And that’s just for the World Cup. Taking into account all other sports and sporting events, the opportunity to insure this niche market is apparent–and one that brokers are starting to notice.
Associations, teams and clubs asking about sports insurance coverage are approaching more brokers, says Darren McDonald, senior underwriter at Risk-Can Underwriting Managers.
“In the past, the league would purchase insurance, and part of the dues [the team] would pay would go towards the insurance,” he says. “But now it’s becoming a requirement for teams to go out and purchase the insurance themselves, and this could be why more brokers are being approached.”
At the local level, the biggest concern is injuries on the pitch; sprains, fractures, head injuries which occur just from playing the game.
Jim Stirling, VP, National Practice Director (Sport &Leisure) at BFL Canada adds that there are also more insurers jumping on the bandwagon. “Twenty years ago, insurers were few and far between [and] now there are many. The products provided, however, vary greatly in quality and scope of coverage.”
Stirling warns that he has seen inexpensive policies issued that excluded certain risks that were supposed to be covered. Brokers are advised to learn about the various risks and coverages.
Venue and Spectator Risks
The risks involved when insuring a sporting event are wide and vary, depending on the type of sport, crowd, and overall scale of the event. Every possible scenario must be taken into consideration to determine and mitigate these risks.
For example, the 2010 FIFA World Cup was expecting 2.75 million ticket holders, many of whom watched the event in South Africa’s biggest stadium, Soccer City. The stadium’s recent upgrade came with a price tag estimated at $470 million (CAN) and increased capacity from 80,000 to 94,000, according to a report released by Munich Re, who played a major part in renovations.
A national event of this scope needs to be considered at each angle–the first of which is crowd safety.
“As the World Cup moves forward and teams are eliminated, people’s emotions are heightened, and they do crazy things when they’re in that situation,” says Mark Woodall, president at Sports-Can Insurance Consultants Ltd. “The organizer needs to anticipate such problems, like if a fight breaks out.”
Woodall advises analyzing the sporting event, and also looking at the type of crowd expected. “Are they rabid fans, calm, individuals that can be quite vocal? These are questions you must ask.”
Another item that plays a big part in spectator risks is liquor if it’s being served. “For example, if someone falls down the stairs due to intoxication, this needs to be covered,” he says.
Stirling adds it is important to look at the venue in general, whether it’s indoor or outdoor, to determine the risks.
“Indoor venues require the identification and inspection of emergency exits, and more facilities are putting in proper first aid rooms with defibrillator capabilities. Outdoor facilities have turf issues and are subject to whims of nature; rain, sleet, snow, lightning–all have their own idiosyncrasies.”
Athletes in contact sports, such as hockey, soccer and football, are more susceptible to major injury. It doesn’t help that athletes are becoming bigger, stronger and more competitive, according to Woodall.
For example, soccer injuries are generally soft tissue injuries and fractures, while hockey injuries can include compound fractures to severe spinal cord damage.
Meanwhile, participants in sports such as swimming, tennis, and gymnastics are less likely to get injured in contact, but still have their own types of sprains, strains and injuries that require protection.
“At the local level, the biggest concern is injuries on the pitch; sprains, fractures, head injuries which occur just from playing the game,” says Stirling. “Coaches and officials should be aware of the quality of the pitch they are playing on as ruts, loose sod, and stones can cause many problems.”
Stirling also adds goalie nets and posts in soccer, for example, must be properly secured. “They are very heavy and on occasion have fallen over, causing severe injuries and even death to the goalie.”
Each risk has a policy in place to protect consumers, whether it’s the organizers of the sport who are at risk, the building operators, the venue or the league.
Athletes, coaches and referees are also subject to their own coverage.
“The players need to protect themselves in case of an injury,” says Woodall. “Meanwhile the coaches have insurance to protect them from things like lawsuits from players, and the referees also have liability insurance to protect them in the event they get sued because they allegedly failed to [deter a fight].”
Commercial General Liability (CGL) insurance is the most common and accounts for about 90% of claims, according to Stirling.
CGL is required by both the venue hosting the sporting event as well as by the individual team. It covers bodily injury and property damage.
“The overall scope of the policy and wide range of coverage extensions are what make this policy effective,” Stirling says.
Another policy that is starting to be widely requested is Sports Accident insurance. This is designed to cover accidental injury to participants, including loss of life, says McDonald.
“The difference between the two policies is that while CGL covers bodily injury caused to third parties, Sports Accident covers participant injury for the team or players themselves,” he says.
For example, if a soccer player accidentally kicked another player while making a play for the ball, and both were injured as a result, CGL would cover the player who got kicked. Sports Accident would cover the player who injured the other.
For brokers working in sports insurance, Woodall offers this last piece of advice. “Ensure your clients don’t buy a standard policy, and instead create a policy that is specifically designed for their risks.”
Footie for Brokers
Not all brokers specialize in the niche market of sports insurance, but for those who do or are planning to, here are some useful tips
- Get informed. Familiarize yourself with the activities and risks in order to make appropriate recommendations to your clients.
- Keep talking. Ensure the lines of communication are open between all parties and discuss your client’s needs.
- Customize coverages. Know how to negotiate with the insurer and create a coverage that meets your client’s specific needs.
- The Commercial General Liability (CGL) policy. This is the most common type of policy, so brokers must become experts in its fundamentals.
- Educate clients. Learn as much as you can about what is covered in each type of policy, and ensure your clients are also aware so they make smart decisions before purchasing.
- Get advice. When all else fails, go to those who are practised in the industry (specialty sports insurers and underwriters, for example) and seek their wisdom.
© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the July/August 2010 edition of Canadian Insurance Top Broker magazine.