Following the most lavish and well-run Olympic Games in history, insurers are keen to play their part in making London 2012 a worthy successor to Beijing. In fact, it’s the sector’s job to prevent the UK tripping up at the first hurdle, writes Mary Ring.
The champagne is still flowing for Team GB, which continues to bask in the post-Olympic glow of becoming the nation’s most successful squad at the Games for a century. But insurers are already busy making plans for 2012.
China has thrown down the gauntlet by hosting the most expensive and extravagant Olympics in history, running the Games beautifully and like clockwork despite surrounding controversies such as alleged human rights violations, the possibility of terrorist attacks and pro-Tibet protests.
Now, the torch has been passed to London. And thousands of businesses will be flocking to east London, where the Olympic Park will be housed in the Lower Lea Valley.
The City estimates that the area’s transformation, from large expanses of derelict industrial land and poor housing into one of Europe’s largest urban parks, has the potential to result in up to 40,000 new homes and 50,000 new jobs.
This has created huge SME opportunities for brokers and insurers. However, beyond this obvious cash cow there are niche risks to be considered and it’s worth asking what expertise brokers and insurers can provide in this respect.
Before Olympic venues are even built, rights to land need to be decided in order to avoid any delays. Title insurance does this by protecting an owner or lender’s financial interest in a property against loss due to title defects.
However, First Title Insurance warns that development could be tricky because the Olympic site has remained underdeveloped for decades. A spokesman for First Title Insurance says: “Whether it is obstructive ancient laws, land ownership disputes, or fraudulent activity which threatens to hold up development, title insurance can help to mitigate the risks.
“At risk from those issues, as well as faced with time sensitivity and scrutinised by the world’s media, the Olympic Park in London is expected to spark a significant surge in title insurance business over the next few years.”
The spokesman adds: “Although key Olympic sites are likely to be acquired and developed with the protection of compulsory purchase powers, peripheral businesses, such as bars, restaurants and hotels, are exposed to the full force of title problems, such as a lack of documentary evidence of ownership of land, or burdensome restrictive covenants. “England is a minefield of ancient laws, which occasionally rear their ugly heads to potentially scupper profitable deals – or put them on hold, at least.”
Imagine the UK’s chagrin if the Olympic Park fails to be ready on time. It wouldn’t be the first time such a grand scheme failed to take off smoothly – both the Millennium Dome and Wembley Stadium that had to face down struggles, not to mention the all too recent Heathrow Terminal Five fiasco.
The big difference here, however, is that any embarrassment related to the Olympics would set Britain up for public ridicule on an international scale.
Ian Nichol, senior underwriting manager at Allianz, says: “It is vital that companies involved in the Olympics are adequately insured both in the run-up to the event and during. The primary objective echoed in the closing speeches at Beijing was that we cannot afford to drop the ball on this one. We do not want the Olympics to be another Terminal Five situation.”
As the Park is being built, plant theft can also throw a wrench in the plans. Allianz is covering much of the plant equipment being used to develop the Olympic site, and is touting plant theft insurance as another way to help ensure preparations are completed on time.
A major reason plant theft is so common is that one key usually fits most pieces of equipment. Generally there is very little security provided to combat plant theft, because ready access is a necessary feature for those working on a site.
“If a contractor has a piece of expensive equipment stolen this can cause a series of delays, which can subsequently become a significant disruption if the thefts become regular,” says Nichol.
“The primary objective echoed in the closing speeches at Beijing was that we cannot afford to drop the ball on this one.
Ian Nichol, Allianz
The Metropolitan Police has made considerable strides in addressing plant
theft in the Olympic Park area. In conjunction with insurers and individual representatives, it has launched Operation Cesar (Construction Equipment Security and Registration), which tags plant equipment with identification numbers. It also uses a tracking system to deter criminals and allow equipment to be returned to its owner if it is discovered. Nichol, however, says: “One concern is that insurers are not aware that the Olympic Delivery Authority has agreed to enforce the Cesar marking scheme.”
Meanwhile, as security tightens in the run-up to 2012, terrorism cover becomes all the more important.
The majority of the terrorism risk for 2012 will be covered by the Pool Re scheme, which was set up by the insurance industry in
co-operation with the government. Insurers that participate in the scheme offer terrorism cover as part of their relevant commercial policies.
Each insurer is expected to pay losses up to a threshold and when those losses exceed that threshold, the insurer can use reserves from Pool Re – a separate company that holds reserves from the insurance industry on a mutual basis. If these reserves fall short, the government will then provide the remaining pay-outs.
QBE’s Nicky Ablett, chair of the Lloyd’s Market Association terrorism business panel, says that any ancillary coverage for 2012 will depend on the general security situation at the time.
She says: “The 2008 Games were no doubt incredibly successful but, as the emphasis in London is likely to be more open and more people-focused, it would be reasonable
to expect more demonstrations and expressions of people power, which may cause delays. The anti-terrorism focus will be strong in London throughout the run-up as well as during the Games themselves.”
A fourth niche area is bonus cover, which can be provided for an athlete’s sponsor or organising committee for any performance-related incentives.
Athletes are often promised bonus payments if they achieve particular performance targets. Britain’s team of 300 athletes took home an unprecedented total of 19 gold medals, 13 silver and 15 bronze from Beijing. As a result, insurers behind Team GB’s policies are already predicting restrictions on bonus cover for 2012.
Paul Thomas, director at Sportscover, says: “Team GB delivered a fantastic performance, better than all expectations. In the lead-up to 2012, I would expect a more conservative approach from insurers on what Team GB is offered in terms of bonus insurance.“The organisation committees and sponsors who offer these bonuses will usually expect the host nation of an Olympic Games to walk away with a few more medals than usual, so I expect extra caution from insurers who will have this in mind.”
Ultimately, the Games are for celebrating sporting achievement. But for that to happen, protection from multiple risks needs to be there.
SME opportunity will no doubt take centre stage for brokers and insurers.
Niche areas such as title, plant theft, terrorism and bonus cover, however, will help ensure that the stage is set for a showstopping performance.
Olympic insurance is one of the themes to be discussed at the Insurance Times commercial lines forum on 13 October. For more information visit www.insurancetimes.co.uk/forum