London's Olympic bid is a goldmine of opportunities for insurance says Symon Ross
London is one of the cities that has bid to host the 2012 Olympic Games.
If successful, the east of the capital will see a flurry of development and regeneration unlike any in recent memory.
The London 2012 committee, government and trade associations have encouraged business leaders to back the bid because of the huge boost it would give to the economy and the potential for profit that such a key international event would create.
And the insurance industry stands to benefit, whether the bid succeeds or not.
There will be undoubted partnership and sponsorship opportunities which some of insurance's biggest names are unlikely to want to miss out on.
The insurance industry fits into the picture more clearly in a number of other areas. The grand plans for the Olympic Park, to be built on a 500-acre site near Stratford in east London, is an example of the extensive property risk requird if the bid succeeds.
New sporting venues
According to the bid committee, creating the Olympic Park would involve the construction of nine new sporting venues, including an 80,000-capacity stadium, aquatic centre, velopark, hockey centre and four multi-sport arenas.
It will require the construction of a huge media centre and an Olympic village. Also there will need to be upgrading of roads, train networks and tube services.
The bid also includes plans to turn part of the Lea valley into a huge urban park creating new riverside housing, shops, restaurants and cafes as a legacy of the event.
Talk of the 16 days of Olympic Games competiton and 12 days of the Paralympics is premature at this stage, some six months before a decision is even close to being made.
But such a major undertaking will require the organisers to have covered all the bases, including insurance for the vast amount of construction work.
Chairman of the bid Lord Coe has said that with planning permission already agreed, work on the Olympic park could begin immediately if London wins the right to host the 2012 games in July.
Contractors have been in discussions with the bid committee and their brokers are likely to have been informed that cover will need to be ready at that time.
Aside from the obvious cover for contractors, James Hooper, broking director at Marsh's sports practice, notes the two big policies that are likely to be bought are cancellation cover and liability insurance. These could involve the London market.
"What I would point out is that London is an international marketplace and whether [the Olympics] takes place in London, Paris, Madrid or Moscow there will be plenty of business coming to London."
But Hooper says that if the games come to London the market will also pick up what he calls "local insurances", such as motor fleet and accident business for the additional transport and the thousands of volunteers that will be needed to help with the event.
These sorts of cover are available in any of the cities that have bid and are not usually internationally placed.
"Less available locally is large scale liability, construction, cancellation, war and terrorism, etc," adds Hooper. "London always gets a substantial proportion of these risks and therefore premiums from any Olympic Games."
The cancellation coverage for the event itself will be one of the key areas where the London insurance market will be involved.
If purchased, it is normally one of the first policies in place to give peace of mind that the revenues and costs are protected.
"London already hosts large sporting events like tennis, football and cricket, but the Olympics puts [the risk] on a more substantial scale," comments Hooper.
Event coverage has, in recent years, turned away from being dominated by insurance following the late withdrawal of AXA from covering the 2002 football World Cup in Japan and Korea.
The organisers of the 2006 World Cup took no chances that the same could happen to them and chose to cover their risk in the bond market.
However, the International Olympic Committee decided a few months before the Athens Games that it intended to buy cancellation insurance from 2004, despite previously relying on its own fund.
This cover is entirely separate, and the host city will need to take out its own cancellation coverage. There is a chance that it could be taken away from the market and covered by the city, the country or other markets.
Hooper notes that because the London 2012 committee is only a bid committee and not yet an organising one, it is not clear what the requirements of cover will be.
They might choose to pass on some of the risk to the taxpayer, but at this stage it is too early to predict.
Liability cover is perhaps the other most essential cover for whichever city does become the host.
With so many expensive athletes present (many of them from the home of litigation, the US) and such vast numbers of spectators, the liability attached for the organisers is huge.
It is potentially a "policy without a ceiling" suggests Hooper, who thinks the committee will buy a big limit for liability cover just as the Athens organisers chose to.
If London is the host in 2012 this cover is especially likely to be bought from the London market, but it could be bought here regardless.
"There are a lot of opportunities for London insurers to become involved with the various risks, more so than if it was in Paris, Madrid or Moscow," says Hooper.
"But even if it is held in another of these cities, a lot of the risk will find its way back to London anyway." IT