Robert Barron and Michael Owen look at the impact of the Christchurch earthquake on this year's Rugby World Cup and the lessons for contingency specialists involved in other major sporting events.
The Rugby World Cup, which starts in New Zealand on 9 September, was nearly knocked off course when Christchurch was hit by an earthquake of 6.3 magnitude in February and subsequent aftershocks.
Due to the damage inflicted on Christchurch's infrastructure, rugby stadia and hotels, the decision was taken in March to move the previously scheduled RWC Christchurch matches to other venues across New Zealand.
The costs involved in moving a major sporting fixture of this nature are significant. Not only do replacement stadia have to be prepared, but tickets need to be refunded and re-issued for the new venues. In addition, advertising and sponsorship deals have to be renegotiated and hotels have to be found for players, officials and fans.
Fortunately, New Zealand's RWC organisers had taken out contingency insurance, and have worked closely with insurers and loss adjusters to move the games to different stadia, avoiding cancellations.
Three pool matches will remain on the South Island, and will be held at the new Otago Stadium. In addition, Nelson, Dunedin and Invercargill will host extra matches, and two other matches have been relocated to Wellington and North Harbour. Two quarter-final matches will be played at Auckland's Eden Park.
Although the earthquake has been a tragedy for the people of Christchurch and created a major problem for the RWC organising committee, contingency insurance has stepped in to offer assistance, ensuring that the show can continue.
Contingency insurance specialists — brokers, insurers and loss adjusters — have a depth of experience and can advise on how to get an event back on track and insurers provide the financial resources to help achieve this. The logistics of managing the rescheduling process are immense and it was impressive to witness how everyone involved worked together.
The Christchurch loss was, however, a nasty wake-up call for the insurance industry, as New Zealand had been considered a fairly 'benign' area in terms of risk.
The impact of this particular loss on the contingency market is likely to be felt especially for events located in areas with known seismic activity. Contingency capacity in the London and international market is still good. There has been no 'knee-jerk' reaction, but the reality is that insurers will be more cautious and are checking their exposure in earthquake zones. As a result, underwriters will continue to cover events in these territories, but they are likely to rate cover accordingly.
The earthquake in New Zealand has also alerted the organising committees of other major sporting events — such as the forthcoming Football World Cups in Brazil, Russia and Qatar, as well as the Winter Olympics in Russia, and the London 2012 Olympic Games — to the importance of robust contingency planning.
Underwriters will be undertaking regular site visits to check that the construction of venues is on track for these events, as well as going through the event plans and, in particular, the risk management and contingency plans.
The London insurance market is the pre-eminent contingency market, and the depth of experience and expertise can help organisers to plan for the unexpected.
World sporting events are commercially lucrative, and it is not just the RWC organisers that are looking for cover. Sponsors, advertisers, broadcasters and merchandisers — to name but a few — want to protect their financial investment linked to the RWC.
In addition, players need personal accident cover — especially for a 'bruising' game like rugby union. The International Rugby Board recently introduced a regulation stipulating the players must have cover when participating in international matches. Some players already have personal accident insurance, which provides adequate cover while they are playing internationally, but others need additional coverage when competing in the RWC.
Most international rugby players stop playing around the age of 30, and it is likely they will have suffered a number of significant injuries during their career, with many taking out cover for career-ending injury. Equally, players often want income protection insurance, in case they should suffer an injury that prevents them receiving lucrative contract payments during the season. This cover is usually geared towards individual player contracts, so the sum insured will depend on the individual player's earnings.
There is no doubt that the Christchurch earthquakes left the RWC plans shaken, but the London market has significant interest in this event and everyone will be hoping that it proceeds without any further hitches.
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