Fin24

London Games insured for $5bn

2012-07-25 12:02

London - The worst-case scenario is expensive. Should the London Olympics be fatally disrupted by an act of terror, earthquake or flooding, around €4bn ($4.8bn) would go down the drain in commercial terms.

That at least is the estimate of leading reinsurer Munich Re, which has equated the value of a total Olympic collapse with that of a football World Cup. Munich Re is itself liable through various policies for around €350m.

These "Insurance Olympics" exceed the capacities of any one of the world's insurers. There are close to a dozen other global insurers carrying this huge risk.

"The biggest challenge is that sporting events of this size simply cannot be moved somewhere else on the spur of the moment," saidf Munich Re manager Andrew Duxbury.

"And not every country would be in a position to cope with a major earthquake as took place in China in 2008, months before the Beijing Games, and still be able to hold the Games as planned," Duxbury said.

There is more at stake than cancellation or postponement. Halting the Games halfway through, interruption and delay are also included in the calculations - along with accidents of all kinds.

Every Olympics has its own particular risks. In London's case it is the ever-present threat of terrorism and the more down-to-earth problem of getting around the British capital.

Evaluating the value of a policy is a complex undertaking, Duxbury said. The terrorist threat is countered by Britain's long experience in combating terrorism.

To this should be added the exceptional efforts being made by the state, which has made around €1.2bn available for security and comprehensive emergency plans.

On the second issue of local transport, there will certainly be major delays for spectators.

But the special "Olympic lanes" on the major routes to and from the stadium will ensure that members of the "Olympic family" - athletes and officials - will get there on time.

The insurance companies deal in the first instance with the London Organising Committee and also with the International Olympic Committee (IOC), sponsors and a wide range of companies involved, including travel agents and hotels, and most importantly television broadcasters.

The IOC has ensured its expected winnings from the London Games of at least $400m. The French IT company Atos has also taken out comprehensive coverage for its activities, which include transmission of results and other data.

And this is certainly true of US broadcaster NBC, which has bought the rights to the London Games from IOC for as much as $1.18bn.

Other broadcasters have also taken out insurance to cover themselves against losses resulting from anything untoward happening over the course of the Games.

There are also smaller policies for accidents and injury to athletes, for example.

But no one is divulging the precise details of the major insurance contracts, which remain closely guarded business secrets.