Insurance risk and reward in the summer of sport
While the event cancellation insurance market tightened wordings and increased rates following the Covid-19 pandemic, rising geopolitical tensions mean other risks are likely to fall under the scrutiny of the insurance market this summer
The insurance industry will play a critical role in protecting this summer’s array of sporting events
The Uefa Football Championship has just finished and we are looking forward to a continuing busy summer programme of sporting events, including the Olympic Games in Paris.
However, any kind of major event comes with risks and related issues arising from potential disruption – whether through civil unrest, weather conditions or cyber attacks – and the insurance sector will have a key role to play in mitigating these risks.
As one of the most high-profile events affected by the Covid-19 pandemic, the postponement of the Tokyo Olympics in 2020 shone a spotlight on the insurance backing these international sporting events, with reports at the time suggesting global insurers faced a potential $2bn to $3bn loss if the event was cancelled.
The event cancellation insurance market has necessarily tightened wordings and increased rates in light of the pandemic. However, rising international geopolitical tensions mean other risks are likely to fall under the scrutiny of the insurance market this summer.
Cyber threats
Increased cyber security threats are high on the agenda for the Paris 2024 organising committee, which is working with the French cyber security agency and other specialists to seek to limit the impact of cyber attacks. The recent strikes, demonstrations and protests against the 2024 Olympics in Paris underline the potential for further disruption as events get under way. Meanwhile, extreme weather conditions, including wildfires and floods, are an additional risk.
In broad terms, event cancellation insurance is designed to cover the cancellation, postponement or abandonment of an event due to unavoidable circumstances and reasons beyond the insured’s control. It can protect against (among other things) severe weather conditions, venue unavailability (due to floods, fires and power outages), threats or acts of terrorism, communicable disease and civil commotion. Conditions and exclusions will, however, restrict such cover, particularly with respect to communicable diseases, following the pandemic.
The severity and associated cost of some climate-related events have also made some insurers place further limitations on cover for adverse weather. Notably, given coverage for large events such as the Olympics is likely to have been taken out years in advance, the changing global landscape means such cover will need to adapt to these developing market trends.
Given coverage for large events such as the Olympics is likely to have been taken out years in advance, the changing global landscape means such cover will need to adapt to these developing market trends
Event cancellation insurance not only covers the risks arising from organising such events but has also been developed to protect those with tickets for the event. Tailored insurance products are available for Paris 2024 that protect ticket purchases, allowing ticket-holders to be reimbursed in the case of certain sudden and unforeseen events that could prevent them from attending the Olympics.
Organisers of the Paris Olympics will also be acutely aware of the cyber security threats to the games, which could trigger any cyber cover in place. High-profile, global sporting events like the Olympics have increasingly been targets for cyber attacks.
Potential cyber attacks range from fake ticket websites used for phishing scams and to access personal information to distributed denial-of-service attacks, which could disrupt the digital infrastructure underpinning the event. Reports from the Tokyo Olympics suggested there were 450 million attempted cyber attacks on the games, including malware, email spoofing and ransomware. The 2018 Pyeongchang Winter Olympics in South Korea was also hit by a cyber attack shortly before the opening ceremony, leading to the official website being taken offline.
Political risk
In particular, the Olympics may be targeted by politically motivated cyber threat actors seeking to disrupt the event for ideological purposes and to increase global geopolitical tensions. While cyber insurance can cover for losses resulting from such security incidents, standard exclusions for cyber attacks and cyber warfare connected to the actions of a specific government or country could limit recoveries.
Other traditional insurance policies covering property damage often exclude (or limit) damages caused by certain types of events, including “riots”, “civil commotion” and “insurrection”. Given the risks of civil unrest – for example, from climate demonstrations or protestors against Paris 2024 – how any such disruptive event is characterised and defined for insurance purposes is open to debate and could lead to potential coverage disputes.
The heightened risk of terrorism may also call for cover for terrorism-related incidents, by endorsement or separate cover under terrorism or political violence insurance.
Sporting events this summer, and the Paris Olympics in particular, are taking place against a complex global backdrop of geopolitical unrest and extreme weather conditions. Insurers covering these events will need to navigate the impact of any potential disruptions on multiple insurance coverage positions.
Needless to say, the insurance industry will play a critical role in protecting this summer of sport.
Clare Douglas is a senior knowledge lawyer and Mike George is counsel at Norton Rose Fulbright
