Sports

Sports insurance business expected to reach $600bn by 2025

The global expansion of the professional sports industry, combined with the varying types of insurance needs, has led to the exponential growth of the sports insurance business in recent years.

sportDBRS Morningstar expects it to continue growing and reach $600 billion in revenue by 2025. Currently, Lloyd’s has underwritten over £150m of premiums for sports related accident and health insurance policies alone.

In a recent note, rating agency analysts highlighted the importance and need for sports insurance; playing any sport creates risks and only some of those risks can be covered by regular insurance policies.

Analysts said: “Insurance needs of professional players and teams are highly sophisticated and require specialized cover provided mostly by the Lloyd’s of London market as well as a limited number of property and casualty insurance companies.

“Professional athletes are mostly exposed to third-party liability and accident risks, which can be transferred to the insurance market. Sports venues, professional leagues, event organizers and clubs are exposed to additional risks, including physical damage to infrastructure and equipment, general liability, directors’ and officers’ liability, business interruption and cancellation of events.

Stratumn, by SIA Partners

Disability and accident insurance is a key risk management tool for professional athletes and teams who may experience significant earnings losses in the event of injuries.

Professional teams can obtain disability insurance on key players to protect themselves financially as they may be obligated to continue paying an injured player’s salary under a guaranteed contract. Third parties, such as major sponsors, may also purchase disability insurance on certain athletes given their insurable interest, while players may obtain additional disability insurance to protect themselves against a career-ending injury.

Business interruption insurance is also a key protection for professional sporting events. For example, event cancellation insurance, which falls into this category, protects the insured party against the loss of income that a business suffers as a result of a covered peril that causes a suspension of its activity.

Many cases throughout history have provided valuable insights for sports organizations looking to mitigate losses due to event cancellations. In addition, the insurance industry has the expertise and capital needed to provide substantial coverage for professional stadiums and arenas, as well as for major events such as the Olympics and FIFA World Cups, analysts noted.

The ratings agency added: “DBRS Morningstar expects business interruption and cancellation insurance to attract increasing interest from professional sports organizations given the recent pandemic and their large financial exposure to a concentrated number of venues.”

Lloyd’s syndicates have developed detailed models to calculate the insurable values ​​of national teams, and have used them to successfully predict the outcome of the last two FIFA World Cups. His prediction for Qatar 2022 places England as the winner of the tournament.

Analysts said: “The calculation of a footballer’s insurable value consists of a variety of criteria such as current and future wages, sponsorships, age and position on the pitch. With the support of the Center for Economics and Business Research, Lloyd’s successfully predicted the outcome of the 2014 and 2018 FIFA World Cups based on estimated collective insurable values ​​of the national teams participating in the tournament.

“The core logic behind Lloyd’s predictions is that national teams with higher collective insurable values ​​have a better chance of winning the World Cup. The recent success of the model illustrates the potential for insurance companies to evaluate player performance through financial value.”

At £3.17 billion, England has the highest estimated insurable value. The second and third national teams with the highest insurance values ​​in the tournament are France, with £2.66 billion respectively, and Brazil, with £2.56 billion.

The ratings agency concluded: “DBRS Morningstar notes that Lloyd’s estimate of a player’s insurable value used for the World Cup prediction is not necessarily linked to the current insured value of that particular player, but it is just an estimate of their potential income until retirement based on current salary, earnings growth potential and endorsement income. According to Lloyd’s, this is a good indication of the performance of players and national teams in the World Cup.”

Print, PDF and email friendly

Related Posts