How Insurers Assess the Unique Risks of Major Global Events

With the 2018 FIFA World Cup Russia over, we ask: What factors do insurers consider when underwriting big events on the world stage?

Insuring events like the World Cup involves substantial sums of money and years of negotiations. Anyone with a financial interest in a major international event will be buying insurance, from those organizing the event down to the vendors selling food outside the stadium. That means potentially billions of dollars are at risk over a short period of time.

Large events carry special risks, says David Boyle, a contingency class underwriter at ArgoGlobal.

“Civil unrest, rioting, terrorists – there’s a whole host of factors that could go wrong,” he says.

Here are some of the things insurers consider when underwriting large events.

  1. 1. Geopolitical climate

    Insurers must take current events into account.

    The insurance that tournament organizers purchase can cover an entire event cancellation, as well as parts of the event being canceled or relocated. It’s a greater possibility that a single game could be canceled, or a venue might become unavailable, rather than the entire event being canceled, Boyle says.

    Other political concerns also exist that can disrupt an event, such as civil unrest and violence. At Euro 2016 in France, for example, violence erupted between English and French fans. Boyle expects Russia to use a heavy hand when it comes to crowd control at the World Cup, including heavy policing, security forces, water cannons in extreme cases, and possibly military involvement, to ensure the games go on.

  2. 2. Terrorism

    An event like the World Cup is probably the single greatest target a terrorist organization can go after, Boyle says, with maximum number of casualties and maximum televised exposure. Just consider the Munich massacre, a terrorist attack that took place during the 1972 Summer Olympics. That makes the risk of terrorism for an event this size greater than that for any random building or concert in the world.

  3. 3. Cyberattacks

    While there’s never really been a major Olympics or World Cup cyber breach, there certainly have been attempts. A cyberattack shut down internet access and Wi-Fi during the opening ceremonies of the 2018 Winter Olympics in Pyeongchang and also brought down the website for the games, preventing attendees from printing out tickets.

  4. 4. Team travel

    When team members travel to the same place at the same time, there’s a greater risk that they’ll all be injured, or worse, if an accident occurs. That nightmare came true in April 2018 when the Humboldt Broncos’ bus crashed, killing several members of the Canadian junior hockey team. If team members travel separately, however, it creates a wider security concern because it means more ground to cover.

  5. 5. Local infrastructure

    During the 2014 FIFA World Cup Brazil, stadium construction and timing were an issue. That same year, the Sochi Winter Olympics had similar problems with unfinished plumbing and electricity. Insurers have to consider whether stadiums, airports, roads and other local infrastructure can handle massive gatherings of people.

  6. 6. Natural catastrophes

    Moscow is not known for having natural catastrophes, such as earthquakes. However, the 2011 Rugby World Cup wasn’t so lucky. Seven matches had to be moved to other venues after an earthquake measuring 6.3 on the Richter scale hit Christchurch, New Zealand, located on the Pacific Ring of Fire. Nevertheless, tournament organizers weren’t dissuaded from choosing Japan to host the 2019 Rugby World Cup.

  7. 7. Clinical disease

    The possibility of infectious disease always raises a slight concern, and that’s likely factored into insurance pricing in a minor way, Boyle says. As with any big gathering of people involving global travel considerations, disease can potentially spread quickly in a short period of time. At the 2018 Winter Olympics, norovirus spread through the venues, infecting more than 100 people.

    A government-level intervention designed to make a single event run smoothly can be very powerful, Boyle notes. The risks are largely within the government’s control. As a result, these major events are considered, among the Lloyd’s market and the company markets, to be the safest contingency risks available.

    In this podcast with Insurance Journal’s Andrea Wells, Dan Gmelin, senior vice president at Argo, head of architects and engineers and miscellaneous professional liability, discusses the risks of building and renovating stadiums under strict deadlines, security concerns and key lessons learned for the future. Listen now.

International underwriter of specialty insurance and reinsurance products in areas of the property and casualty market.

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