Insurers foot $5 bln risk with soccer World Cup

* Reinsurers Munich Re, Swiss Re with biggest risk covers

* FIFA, broadcasters, travel firms, sponsors buy cover

* Policies against terror attacks, war in demand

By Christian Kraemer

MUNICH, May 10 (BestGrowthStock) – Soccer teams and fans aren’t the
only ones girding themselves for the start of the World Cup in
South Africa. The world’s insurance companies have sold policies
covering $5 billion worth of risks linked to the games.

With just a month to go before the starting whistle blows on
the first match — pitting the host’s national team against
Mexico — soccer world governing body FIFA, national organisers,
broadcasters, travel firms, advertising agencies and sponsors
have all taken out policies against cancellation or disaster.

Naturally, the $5 billion of contingency and other risks is
spread among many insurers, but some of the biggest chunks of
risk will be passed on to the sector’s two biggest players,
reinsurers Munich Re (MUVGn.DE: ) and Swiss Re (RUKN.VX: ).

Reinsurers act as a financial backstop for risks too big for
smaller insurance companies to handle on their own, such as if a
militant attack or earthquake puts a stop to the tournament.

Munich Re is holding about $350 million of exposure, said
Sabine Bach, head of contingency risk at the world’s biggest
reinsurer. “That’s not chicken feed. We have got the biggest
share of insurers’ risks,” Bach said.

World No. 2 reinsurer Swiss Re is also covering a triple
digit million amount, said company special risks specialist Hans
J.R. Steffen.

Europe’s biggest insurer Allianz (ALVG.DE: ) and No. 4
reinsurer Hannover Re (HNRGn.DE: ) also hold World Cup risks.

While insured risk for the games, to be played from June 11
to July 11 for the first time on African soil, may not be as big
as some natural catastrophes such as hurricanes or earthquakes
or man-made disasters such as the sunken oil platform in the
Gulf of Mexico, they are prestige business for the industry.

Just as they did for the Olympics, whole teams are working
to figure out the mathematical dangers and therefore make the
risk insurable.

SOUTH AFRICA CAN

South Africa has won kudos from the insurance industry for
its handling of big international sporting events such as the
rugby and cricket world cups.

“Naturally the soccer World Cup is bigger, but South Africa
has shown that they can do it,” said Munich Re’s Bach. “The
cancellation risk is no higher than in many other countries,”
she said.

However, the country still faces some caveats, such as the
risk of hail, flooding, earthquakes or power failures.

“For an additional premium, the risk of war or a terror
attack can also be covered,” said Swiss Re’s Steffen, adding
that some organisers had taken up the offer.
War is seen as no more than a remote risk, while security
measures surrounding the games mean the chances of a terrorist
attack are little different from the 2006 World Cup in Germany
or the 2008 European Cup championships in Austria and
Switzerland.

Still, reinsurers have taken everything into consideration.

“The worst-case scenario would be a terror attack at the
opening ceremony in a stadium with several thousand dead,” said
Swiss Re’s Steffen.

For Munich Re’s Bach, the fear is of no grand finale.

“If the television screens were blank, that would be bad.”

Stock Market Advice

(Writing by Jonathan Gould; Editing by David Holmes)

Insurers foot $5 bln risk with soccer World Cup