Insurance to avoid a Rugby World Cup mauling

Companies involved in the Rugby World Cup are using insurance to relieve the financial headache caused by potential disruption to the tournament.

When the Rugby World Cup kicks off at Twickenham later this month it won’t only be millions of rugby fans keeping their fingers crossed that everything goes well. Lots of companies are also banking on the success of a tournament that is forecast to generate around £1 billion for the UK economy. Many firms will turn to contingency insurance to protect their investment, which pays out if an event is cancelled, or starts but then is forced to close, or move to another location.

Big events are also now big business and if anything goes wrong then companies can be left out of pocket. “Any company that is either spending money on, or that could earn money from, an event should buy insurance – whether it’s the organisers, TV broadcasters and sponsors, right the way down to a company hosting a World Cup-related party or a one man band printing World Cup T-shirts,” says Elizabeth Seeger, Contingency Line Underwriter at Hiscox London Market.

“Known unknowns” and “unknown unknowns”

Donald Rumsfeld’s infamous remark about “known unknowns” and “unknown unknowns” pretty much sums up the task facing contingency underwriters when insuring major tournaments like the Rugby World Cup.

The “known unknowns” (“things we know we don’t know”) include the threat of terror attacks, and communicable diseases – which has struck rugby before: the 2001 foot and mouth disease caused several Six Nations games to be postponed.

But there is also a host of potential “unknown unknowns” (“things we don’t know we don’t know”), which could lead to big events being cancelled or seriously disrupted. For example, what if an event occurred in one of the competing countries that prompted a period of national mourning to be called, preventing its national team from playing? Or would the police force one (or more) of the big matches to be called off, because of an unexpected drain on its resources?

Many firms will turn to contingency insurance to protect their investment, which pays out if an event is cancelled, or starts but then is forced to close, or move to another location.

The earthquake that ravaged the New Zealand city of Christchurch in 2011 is perhaps the ultimate example of a freak of nature. The rugby-mad city was due to host eight games in the Rugby World Cup later that year – including two quarter-finals – but damage was so severe that they had to be moved to other cities, creating a major headache for the organisers. Ticketholders for the games had to be offered either refunds or new tickets at the other venues, leading to a drop in revenue.

Luckily, the organisers had bought a contingency insurance policy and so were protected against the financial fallout from the disaster. “We selected Hiscox as our lead underwriter due to its reputation for taking a practical and proactive approach to dealing with contingency events and claims. We never imagined how important this would become until the devastating Christchurch earthquake hit and we had to make a decision to relocate eight matches scheduled for Christchurch,” says Sally Kane, Corporate Services Manager, Rugby New Zealand 2011 Ltd.

“We worked closely with Hiscox through this decision-making process and sincerely appreciated their support and trust they placed in [us]…. This meant we could implement our contingency plans quickly to minimise any further disruption to the tournament and provide certainty to all stakeholders. Hiscox took a practical and hands-on approach to resolving our claim and… this resulted in the claim being resolved very quickly after the tournament finished.”

If there is a silver lining to an insurer’s Rugby World Cup cloud it is, surprisingly, the weather. While the unpredictable British climate is an ever-present threat to a sporting calendar – “wet summers are always a nervous time for me” Seeger admits – the possibility of torrential downpours and howling gales is often welcomed by rugby aficionados as a test of players’ character, rather than a reason to call the whole thing off.

Expecting a late rush

For most big events the organisers will buy cover early, but insurers often see a late rush from smaller firms. “A lot of companies tend to come into the market very late,” says Seeger. “During the London Olympics we saw a lot of interest from organisers of small events related to the games, such as Olympics parties in parks with big screens to watch the action.”

Demand for contingency cover among smaller companies tends to be driven by the headlines. Media stories forecasting bad weather, or a possible epidemic or terror attack will often cause event organisers to try to arrange last-minute cover.

“We advise people to buy early when the cover is readily available," says Seeger. “That’s very important when you have a big event in one location, because there may not be any more capacity available if it is left too late .”

Business is already brisk for the 2019 rugby tournament, being held in tremor-prone Japan. “There is already a lot of interest in buying cancellation coverage, because the biggest firms know there is a finite amount of earthquake capacity available – especially with Tokyo hosting the 2020 Olympics – so they want to snap it up now, in case the price goes up,” says Seeger.

The same is true for the 2018 Winter Olympics, being held in PyeongChang in South Korea. Companies worried by military conflict between the two Koreas are already making sure they have coverage against the games being affected.

Despite the uncertainties posed by Mother Nature, disease and global politics, insurers have one thing going for them: for everyone involved the show must go on, with only the direst circumstances forcing a cancellation. “These are showpiece events watched by many millions of people around the world, so they want to be seen to go smoothly, despite any hiccups,” says Seeger.

Players taking cover from big hits

England launch their Rugby World Cup campaign on September 18 against Fiji, known for their deft handling as well as their bone-juddering tackles. The home side’s prospects of winning the tournament are dependent on keeping their stars fit, but teams are taking steps to protect the effect their key players have on the balance sheet as well as on the pitch.

Although it still lags far behind football, money has been pouring into rugby since it went professional in the mid-1990s.The big clubs now have annual revenues of millions of pounds and they are increasingly keen to protect their biggest assets – including their players.

Professional rugby clubs now routinely insure their players against injuries. A Temporary Total Disablement (TTD) policy covers against a player being sidelined by an injury, paying towards his wages while he isn’t on the pitch and the cost of his medical treatment. A Permanent Total Disablement (PTD) policy will compensate if a player suffers a career-ending illness or injury.

Although they don’t earn the telephone-number salaries of footballers, big rugby stars can now attract big wages, which clubs are anxious to insure. “The biggest contract that I’ve heard of [in England] is for a salary of £500,000,” says Malcolm Smart, Personal Accident Underwriter at Hiscox London Market. “There are some bigger ones for players in the French leagues of up to £1million because that’s where the big money is at the moment.”

These club policies will not cover players when they are on international duty, however, so the national teams will buy their own policies in case of injuries. These too will be smaller than in football, again because of the sport’s lower wages but also because the relationship between club and country tends to be much less fractious than in the round-ball game, says Smart.

Some national unions, such as Ireland and Wales, already directly contribute part of several top national players’ wages, whereas the English RFU has an agreement with clubs in which it pays fees to compensate clubs for the loss of their stars on international duty. So there is less potential for arguments over who picks up the bill for a player’s wages if he gets injured.

Players in the final year of their existing club contracts, or who are in the process of negotiating a move to another club might also buy their own insurance cover, to protect themselves against an injury that could affect their future earning power.

So how dangerous is it to insure a rugby player?

Since the era of professionalism began 20 years ago, players have been able to train harder, making them fitter but also bigger. Players in today’s England team are, on average, more than a stone heavier than their 1992 predecessors. When players of this size collide the forces involved are similar to those experienced in a car crash.

But better training, conditioning and medical care have helped players to survive the bigger hits they now take, and to recover quicker from injuries – including those that were once considered to be career threatening. “Although the collisions are bigger, players’ bodies are better able to take the contact, because of their training,” says Smart

Research suggests that the number of injuries in elite rugby has not increased since 2002, says Martin Raftery, the International Rugby Board’s Chief Medical Officer. But the accumulation of injuries is worrying some within the game. The Rugby Players’ Association, the English players’ union, reported an 85% rise in the number of players who were forced to retire due to injury between the 2010 and 2013 seasons.

The price of insuring rugby players reflects the intensely physical nature of the sport. “The rating for rugby players is higher than for footballers, partly because of the physicality of the sport, but also the issue of concussion,” says Smart.

But the law of big numbers has helped the cost of insuring the big hits. “It’s a brutal game, but although the rating has gone up a little, it hasn’t gone up by a lot because there’s now more players, so the numbers of insureds have increased, which helps to spread the risk,” says Smart.

Concussion in rugby has come under the spotlight, with new research from the US on American Football players suggesting a link between frequent concussions and degenerative brain disease in later life, while a number of ex-rugby players have recently spoken out about health problems they have suffered. It is set to be the biggest issue the sport faces in the years ahead, as the after-effects of playing the game in the professional era become clearer, says Smart.

“US contact sports, such as ice hockey and American Football, are now taking head injuries increasingly seriously, partly because of the long-term health of the players. Concussion is now an increasingly big issue in rugby,” Smart says.


  • Contingency