The New York Times - July 2016 - article 2

Sewage Spill, Check. Rerouted Race, Check. Contracting the Zika Virus ...

By: Ken Belson

July 21, 2016

Come what may, the Rio Olympics set to begin Aug. 5 will be largely covered. By insurance, that is.

Many potential threats loom — the Zika virus, terrorism, civil unrest — but underwriters say a dramatic interruption or cancellation of the Games will not leave organizers empty-handed. Nearly $2 billion in insurance has been secured to cover the International Olympic Committee, broadcasters, organizers and others with a stake in operating the Games.

The cost of putting on the Olympics is estimated at $20 billion, including the construction of stadiums, housing and other sites, many of which will serve a purpose beyond the Games.

The policies are designed to cover some or all potential losses directly related to the Games, whether caused by a natural disaster, a terrorist attack or another “unknown peril,” in industry terms.

Smaller-scale problems are likely to be covered. If, for example, protests force organizers to reroute the marathon, the costs of moving the event would be covered. Or if strong winds or sewage spills delay or cancel sailing events, organizers should expect a check for any financial damages. Zika has been a focus, as some of the biggest names in golf and tennis are not attending the Games because, they say, they do not want to risk contracting the virus.

Such absences could hurt ticket sales and television ratings, prompting organizers, broadcasters and sponsors to ask their insurers to make up lost revenue. But with the start of the Olympics just two weeks away, insurers are already serving notice that they may not cover every type of loss related to Zika.

In their view, rather than paying anything related to individual cases, they will cover a full-on cancellation or postponement of the Games or a sporting event.

Zika falls under the category of communicable diseases, which is typically covered under standard policies. Given the unpredictable and potentially devastating consequences of such diseases, insurance brokers often recommend that clients buy the protection.

Clients who bought communicable-disease coverage several years ago would be covered because the threat from the virus was unknowable at the time that the policies were written. Anyone who bought coverage for Zika-related claims after the threat of the virus became a “known peril” had to pay more for coverage or might have had a difficult time getting it so close to the start of the Games.

If a policy with a communicable-disease clause “was broadly worded five years ago, we might cover it,” said Andrew Duxbury, an underwriting manager at Munich Re, which has written insurance policies for the Rio Games, along with reinsurance — coverage for insurers against their potential losses. But “if you approach the market now and you go to Brazil and were worried about Zika and wanted specific Zika coverage, our position would be it is a step too far.”

Duxbury and other insurers, though, say that claims will be valid only if Zika causes events to be canceled or postponed, and the chances of that are increasingly remote.

In June, the World Health Organization said that athletes and spectators, except for pregnant women, could attend the Rio Games as long as they took precautions against becoming infected. The virus, which is transmitted by mosquitoes, is less likely to be spread during the Rio Games because they are taking place in the cooler climate of the Southern Hemisphere’s winter, the organization said.

Even if an outbreak of Zika occurs during the Games, obtaining payouts will not be easy.

According to insurers, brokers and consultants, for a claim to be valid, an established group like the W.H.O. or the United States Centers for Disease Control and Prevention must issue a warning that an event should be postponed or canceled because of the threat from Zika.

By contrast, insurers are unlikely to honor claims from broadcasters or sponsors that claim they lost money because top athletes like Rory McIlroy pulled out of the Olympics over worries about the Zika virus. Television ratings and advertising plans might be hurt, but insurers will have little sympathy.

“Policies don’t trigger just because you have a fear of something happening,” said Dan Burns, the chief executive of Pro Financial Services, which has underwritten policies for the Olympic Games. “A third party has to issue guidelines or warnings.”

Though events at the Olympics may not be postponed or canceled, people working at the Olympics could get be sickened by the virus. In many cases,...

See full article on the NY Times website here.

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