Political unrest and major sporting events

Growing awareness of politics in sport
The postponement of the Bahrain Grand Prix in March has helped raise awareness of the risk of cancelation as a result of political unrest, said Chris Rackliffe, contingency underwriter at Beazley.

“Awareness of political risk has been growing with increasing civil unrest, riots and protests arising from higher food prices, austerity measures and the push for democratic change in the parts of the Middle East and North Africa,” he says.

“The postponement of this year’s Formula One Grand Prix in Bahrain is a classic example of how political risk can lead to the cancellation of a major sporting event, and at a considerable costs to organisers and sponsors,” he says.

Home and away
The Grand Prix was just one of a number of events cancelled or postponed this year in Bahrain because of protests. These included the country’s international garden, motor and boat shows, as well as events related to the Bahrain’s Spring of Culture.

Events in Bahrain are not only a reminder that demonstrations and civil unrest can lead to cancellation in the Middle East, says Rackliffe. Recent years have seen food riots in many countries, civil unrest in Thailand and even Europe where violent demonstrations against austerity measures have taken place in France, UK, Italy and Greece.

The 2001 terror attacks in the US led to many events being postponed or cancelled, including golf’s Ryder Cup and American football’s Super Bowl XXXV. The terrorist attacks also affected the US major baseball league, motor sport, European football, as well as pop concerts and TV shows.

Emerging sporting nations
As countries are increasingly keen to show themselves on the international stage, sporting bodies from a wide range of countries are hosting major events– for example this year India will play host to its first Formula 1 Grand Prix while South Africa became the first African nation to stage the World Cup in 2010.

In the Middle East, Dubai hosts many important events in horseracing, golf, cricket and rugby. This year it will hold the Rugby Sevens in December, while Abu Dhabi will play host to a Formula 1 Grand Prix in September and The World Cup is also destined for the Gulf state of Qatar in 2022.

Bringing event and political risks together
Standard forms of contingency event cancellation insurance typically exclude cover for political risks such as terrorism or civil unrest. However Lloyd’s underwriters will usually provide cover for political risk following a rigorous assessment.

Cover is widely purchased by organisers, sporting federations, sponsors, TV broadcasters and merchandisers, says Elizabeth Seeger underwriter at Hiscox. Underwriters can provide insurance against necessary and unavoidable cancellation from natural catastrophes, outbreaks of disease, as well as political risks such as terrorism, riots, and civil unrest, she says.

Hiscox contingency underwriters are able to benefit from the insurer’s established terrorism and political risk expertise, says Ms Seeger. “Being able to share in-house knowledge and external expertise is a real additional benefit. We are able to discuss risks with our terrorism and political violence team, and use external consultants like Control Risks for advice and modelling.”

However, organisers and sponsors should consider buying political risk insurance well in advance,” says Rackliffe. “If you come to the market late to buy cover you may find that it is not available or is very limited and expensive.”

Assessing the Middle East future
Lloyd’s continues to offer cancellation insurance for events in the Middle East, but proposals are considered on a case by case basis, says Rackliffe. “Where there is a lot of instability, political risk cover may be excluded or offered on a limited basis. Lloyd’s underwriters have the expertise to consider the exposures and offer cover where possible.”

For example underwriters are providing cancellation insurance for events in Dubai, but they do consider the situation of the Middle East when underwriting, says Rackliffe. “The risk of contagion is at the back of underwriters’ minds and there are a lot of countries in a similar situation to Bahrain,” he says.

Recent events in the Middle East have not led to a knee jerk reaction from underwriters to exclude political violence perils, says Ms Seeger. “There is not a blanket effect of unrest in the entire Middle East, and Hiscox will always try to help clients and look for ways to offer some level of cover.”

One grey area is the often fine line between a civil commotion or popular uprising and a civil war. It can be difficult to know where to draw the line, for example, between civil unrest and civil war in situations like Bahrain, she says.

“At Hiscox we advise that clients to buy a full political violence policy to make sure they are covered says,” says Seeger. So when there are events like those in the Middle East there are no gaps in cover and the scope of coverage is much clearer for both sides.”

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