Canadian Underwriter

Beyond Fun and Games

July 3, 2015   by Andrew Duxbury, Underwriting Manager, Munich Re

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This summer, thousands of athletes from the Americas and the Caribbean are to gather in Toronto for the Pan American Games and the Parapan Am Games. Over 16 days in July and eight days in August, athletes will compete in 36 Pan Am sports and 15 Parapan Am sports in many different locations around the Greater Toronto Area (GTA). More than 20,000 volunteers are slated to work toward ensuring athletes, coaches and visitors are welcomed and feel at home.

Such events are a big undertaking, demanding years of planning and preparation.

But what if the Games do not start, or are interrupted? What would happen in the event of a windstorm or flood?

When British monarch, Edward VII, fell ill in June 1902, shortly before his coronation, the festivities had to be postponed. This spurred a series of court cases, which became known as the “coronation cases,” and for the first time, an event cancellation was recognized as a legitimate reason for withdrawing from a contract.

Insurance policies to cover these situations are essential for any large sporting event. If the event cannot be held as planned, or is cancelled altogether, associated costs can be high. Consider demands from television networks that planned to transmit the event, sponsors who pumped money into advertising and visitors who purchased tickets, as well as the merchandise and accommodations that would not be sold or used.

Insuring major sporting events like the Pan Am Games, the Olympic Games and other major sporting events involves a variety of covers ranging from construction/erection all risk (CAR/EAR) insurance for building stadiums and venues, to liability covers for the organizers, accident insurance for the athletes, and covers against theft of trophies or medals. Event cancellation insurance is one of the most important types of cover.

Interruption, postponement or, if worst comes to worst, cancellation of these events can result in enormous costs. Not only sporting event organizers, but also television broadcasters, sponsors, souvenir manufacturers, travel operators and hotel owners can protect themselves against the financial consequences of such a scenario.

Big sporting events are also big business, with revenues generated through television rights, sponsorship, ticket sales, corporate hospitality, travel packages and souvenirs running into billions of dollars. The overall economic impact of such events can only be estimated, but the single largest individual revenue stream comes from the sale of television screening rights.

With the financial stakes high, global sporting bodies, local organizers, security forces and (re)insurers combine forces, often many years before, to achieve the common goal of a successful sporting event enjoyed by a wide audience on television and many more in person.


While cancellation policy wordings vary, as they are adjusted to individual requirements, cover is fundamentally sought to protect against any unforeseen cancellation, abandonment, interruption or relocation of the event – including the opening and closing ceremonies.

The major underwriting considerations involved in covering such large events include the following:

• contractual commitments/liability of the insured (television/sponsorship/ticket conditions);

• the political risk environment (war, internal unrest, terrorism exposure, etc.);

• exposure to natural hazards (for example, earthquake, windstorm, flooding);

• the host country’s experience in hosting large global events;

• security arrangements;

• the host country’s infrastructure; and

• the organizer’s contingency plans.


Canada has hosted three Olympics – 1976 Montreal, 1988 Calgary and 2010 Vancouver – and security considerations were vastly different for each. The Montreal Summer Games were organized in light of the sad events of the 1972 Munich Olympics and the FLQ crisis, while the 2010 Winter Olympics in Vancouver considered the post-9/11 reality.

Climate was an issue in Whistler, as truckloads of snow had to be brought in to cope with the lack of natural snow. Earthquake exposure exists in both locations. And while this was noted in planning documents for each of the Games, the risk was thought to be minimal compared to security risks.

The security organization for Montreal and Vancouver were the largest peacetime operations in Canadian history.

Other considerations for the Vancouver Games included flooding of British Columbia’s Lower Mainland, fire, excessive snowfall, and damage or collapse of the Lion’s Gate Bridge.

Many of the aforementioned were safety risks covered in the routine operation of public infrastructure. However, mass volumes of spectators and event personnel added pressure to the transportation system, something that was certainly a consideration in Toronto’s Pan Am/Parapan Am Games.

In Vancouver, traffic was a particular concern for organizers, especially on the Sea to Sky Highway linking Vancouver and Whistler, the site of a summer landslide in 2008 that closed the throughway for several days.

With intense media attention on such events, it also attracts activist groups that use the potential for unrest or disruption to highlight their causes. The Vancouver Opening Ceremony – a significant part of the overall event – was very nearly compromised on the night as protesters blocked routes to the stadium, threatening to prevent athletes and officials from reaching the ceremonies in time.

In Toronto, there was significant public conversation about the impact on traffic flows. Major arterial highways throughout the GTA were given designated HOV (high-occupancy vehicle) lanes in advance of the event exclusively for vehicles carrying three or more people. Organizers asked businesses to consider modified work hours and telecommuting for staff to alleviate the expected 250,000 spectators and athletes coming to the GTA during the event.

A survey recently released by the Ontario Trucking Association notes some carriers worked with their customers, determining alternate delivery times, sharing costs for using toll-enabled routes, or modifying existing guaranteed service levels.

In all, almost 43% of polled carriers reported that they had or would implement surcharges to offset money lost because of congestion encountered.


Obvious insurable perils include weather, natural catastrophes, acts of terror, communicable diseases, venue damage, power failure, satellite or transmission failure, riots, strikes, civil commotion and national mourning.

Each type of sport has its own technical challenges, as does each venue, and there are no limits to the kinds of reasons for an event cancellation. The only important criterion for the policy to attach is that the trigger event must lie outside the control of the policyholder.

The biggest challenge posed by sports events of the scale of the Olympics or the Pan Am Games is that they cannot be moved to another venue at short notice if something untoward happens immediately beforehand.

And not every nation would be able to absorb the effects of a powerful event, such as the earthquake that occurred in China in 2008, just a few months before the Olympic Games, and still carry out the games as planned.

Some sports events can be relocated to other stadiums or facilities in an emergency. Consider, for example, the 2011 Rugby World Cup in New Zealand, where in the wake of the Christchurch earthquakes, the united efforts of all those involved succeeded in conducting the competition in other cities. The additional costs that resulted were borne by the insurers.


Security threats cannot be ignored. This is well-known, certainly since the attack on and the deaths of 11 members of the Israeli team that overshadowed the Munich Olympics in 1972. Terrorism is an omnipresent ha
zard that always needs to be taken into account in underwriting.

In March 2015, for example, 35 teams pulled out of a major cheerleading tournament hosted at the West Edmonton Mall after a Somali terror group made threats against the shopping centre.

Although the likelihood of attack was remote, it was sufficiently concerning that many school-based teams withdrew, some of these decisions following consultations with the insurance companies that cover liability for the schools.

A physical loss to event venues from natural catastrophe, weather or builder error can also prove disruptive. In July 2011, a sudden windstorm partially collapsed a stage at an Ottawa music festival, injuring three and causing organizers to close the stages and cancel the evening’s remaining performances.

Contingency plans to move an event to another location are sometimes possible, although this demands additional time and resources, rescheduling and reconfiguring security arrangements and transportation both to and from the new venue.

Countries with often the highest exposure to terrorism are also usually the best-equipped to counter the threat, particularly given the amount of international collaboration undertaken around such events.

Despite the potential for terror threat at the London and Sochi Olympic Games, both events ran well while maintaining high levels of security.

Global events can also import international issues into a territory. To assess these, security would include information such as the following:

• host experience – police/security forces;

• venues – are they purpose-built?;

• athletes’ transportation;

• employee- and volunteer-vetting procedures; and

• contingency plans.

Terror cover provided will generally be limited by time before and distance from the event. There will be prescribed triggers specifying which authorities are able to cancel or suspend the event.

Realistically, for such global sporting events, it will be the government of the host nation that decides such matters. However, there are considerable vested interests in ensuring that the event continues – as was the case with incidents in both Munich and Atlanta.