Time Out for the World Cup

For the first time in its 80 year history the Football (Soccer) World Cup will be played on the African Continent. The quadrennial event matches 32 of the world’s best national teams in a tournament that lasts a month. It starts today, June 11, as South Africa, the host nation, takes on Mexico, and ends with the final on July 11.

Only the Summer Olympic Games attract more global spectators. Even if the sport isn’t as popular in the U.S. as it is in the rest of the world, it will nonetheless be watched by a lot of people, especially if the U.S. team does well. That could be determined on Saturday, June 12, when the team plays England, one of the pretournament favorites.

Organizing the games takes a great deal of effort and costs a lot of money, which inevitably means that the insurance industry is called upon to assume some of the risks. According to Lloyd’s the estimated insurance coverage is around £6.2 billion [$8.95 billion], broken down into property – $4.33 billion; “contingency” (mainly game cancellations or broadcast failures), and liability – $288.6 million. [See IJ web site: https://www.insurancejournal.com/news/international/2010/06/07/110474.htm ].

That’s just for the games themselves. Lloyd’s turned to Chris Nash, an underwriter at Sportscover, for some additional input on the “vast range of potential coverage.” He rattled off a list that includes competitions, offers, prizes, sponsorships, and broadcast rights. “It’s impossible to know how many there are, but all companies with these financial implications need coverage,” he explained. “When you take this into account along with the number of broadcasters around the world airing the games, I’d probably estimate the whole thing at around £3 billion [$4.33 billion].”

Aon is one company that shouldn’t have any problems finding coverage for its four year uniform sponsorship of one of England’s most storied clubs, Manchester United. As of June 1 Aon’s name and logo will replace AIG’s, the former sponsor. Aon didn’t reveal the financial terms of the contract when it acquired the rights, but when AIG announced its agreement in 2006, it had agreed to pay £56.5 million, just under $100 million at the time.

Shirt sponsorship is a lucrative, even vital, source of revenue for most of the world’s football clubs. But the sponsor has good reasons to pay for the rights to have their name and logo displayed on the shirts, especially on the shirts of historic teams such as Man United. The football club has an estimated 333,000 fans who follow its games all over the world.

With the exception of auto racing, U.S. sports teams, which are, to say the least, dedicated commercial enterprises, have yet to adopt shirt sponsorship as a means of increasing revenues. Why everything from stadiums to hot dogs are named after companies – in exchange for payment – but not uniforms, remains a mystery.

The players who wear the uniforms are also valuable, and therefore insurable, entities. According to Peter Thompson, underwriter at Beazley quoted by Lloyd’s, a “player at the height of their career and playing in one of the top leagues for their country could be insured for £50 million [$72.21 million]. Assuming the player has no “pre-existing conditions, £40 million [$57.75 million] of this insures their entire body for sports disability, including accidental death and permanent total disablement, 24 hours a day.”

Football’s top players face not only physical injuries, but also potential damages to their image, which can decrease their value as endorsers of products. 24 hour a day media attention shines a spotlight on them, which makes their “brand” more valuable, but also more vulnerable. Thus a player’s image can “make or break their celebrity status.” As a result clubs need to insure their reputation as much as their feet to generate lucrative merchandise sales.” Dan Trueman, underwriter at Kiln, estimates a footballer’s brand to be worth around £10 million [$14.437 million].

The insurance industry is also heavily involved with the fans who attend the games as well, mainly through sales of travel insurance and related coverages. The host country, the participating countries, the fans and the sponsors have a lot riding on the World Cup going off smoothly; so do the companies that have insured it.

Topics USA