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Experts: Athens insurance tab could triple
Published February 4, 2002
Security at Salt Lake
has been the top
concern since Sept. 11.
Organizers of Salt Lake City Winter Olympics escaped a spike in insurance premiums that followed the Sept. 11 terrorist attacks by purchasing cancellation insurance two years ago, but coordinators of the 2004 Games in Athens might not be as lucky.
Industry experts said insurers could double or triple the 10 percent premium for the coverage because of the attacks, resulting in tens of millions in additional costs for Athens — if organizers can even get coverage.
"In general, the event cancellation market has shrunk dramatically and it will be very difficult to put together a large amount of coverage, especially at reasonable prices," said Marc Idelson, senior vice president of ASU International in Boston, which is insuring a portion of the Salt Lake Olympics.
"Sept. 11 has changed everything," Idelson said. "In the past, terrorism wasn't a major concern, but now it is."
Two factors occurring simultaneously in the insurance market are driving up costs. One is the increased risk of terrorism after the Sept. 11 attacks. The other is that fewer insurers, fearing massive claims, are willing to accept higher risk demands, causing a lack of availability of coverage. The combination is pushing premiums skyward.
"The market's capacity to cover terrorism is even less than [for typical cancellation coverage], and there are fewer and fewer insurers willing to take the risks," Idelson said.
While some events can reduce premiums with policies that exclude terrorism coverage, experts said that high-profile events like the Olympics must carry the coverage, regardless of the premiums.
"Exclusions for terrorism are being put into place, but some events like the Olympics and Super Bowl require it," said Dennis Burns, president of Pro Financial Services, a Chicago-based sports insurer. "The problem is that some insurance markets won't write it."
Following the Sept. 11 attacks, international insurance giant AXA pulled nearly $800 million in coverage for next year's World Cup soccer championship after FIFA, the international soccer organization that runs the event, refused to renegotiate new terms demanded by AXA to assume risks against terrorist attacks. Eventually, FIFA was able to secure coverage through other carriers.
"Before Sept. 11, the industry was already heading into a hard market, and now it is just a harder market," said Rick Nelson, public affairs director for the National Association of Mutual Insurance Cos. "There will be higher rates charged because of the fear of the unknown. And if there should be another attack, all bets are off."