No amount of coverage can mitigate all the risk of 2026 Olympic bid: experts
A 2026 Olympic bid would be backstopped by “layers of insurance policies” to protect taxpayers from financial risk, according to Calgary’s bid committee.
However, some experts caution there is no insurance that offers full protection against the host of unforeseen circumstances that could strike the Games and send costs skyrocketing.
Calgary’s proposed bid already sets aside more than $1 billion in contingencies to buffer its budget. The bid corporation has said it also plans to spend approximately $20 million to purchase $200 million in insurance coverage specifically for construction cost overruns — a proposal that was key to securing the funding agreement reached in late October, because the federal government promised to commit an additional $200 million in Olympic funding to match the value of the proposed insurance policy.
Drew Fitch, Calgary 2026 CFO, assured a council committee earlier this week that discussions have already taken place with AON, the world’s second-largest insurance broker and also the City of Calgary’s insurance broker. He said the bid corporation has been assured that it is possible to purchase such a policy. “There’s nothing unusual here,” Fitch said. “They (AON) also commented to us, that with respect to Olympic bids in North America, everyone has been down this path in considering cost overrun insurance.”
But while many potential host cities may have talked about cost overrun insurance, Brad Humphreys, an economics professor at the University of West Virginia and formerly of the University of Alberta, said he isn’t aware of any Olympic city that actually went ahead and purchased such a policy. The reason, said Humphreys (who co-authored a report evaluating taxpayer liabilities associated with Boston’s proposed hosting of the 2024 Olympic Games), is because the policies don’t actually protect against the factors that pose the biggest financial risk.
In fact, Calgary’s bid committee has already acknowledged an insurance policy would not protect against cost overruns that occur because of a change in scope of the project. Humphreys said that’s a problem, because scope changes
— adjustments and enhancements to proposed construction projects — are one of the main reasons overruns occur. “Think about it from the insurance company ’s perspective,” he said. “You can get insurance for a car wreck, because that’s a rare event. You can’t get insurance for oil changes because those are going to happen. And change of scope overruns happen all the time with the Olympics.”
The proposed policy would protect against overruns that happen for other reasons — such as adverse weather or labour disruptions.
Anne Kleffner, a professor of insurance and risk management at the University of Calgary ’s Haskayne School of Business, said she can understand the appeal for Calgary 2026. “I think there is some real attraction in the idea of buying something that they can budget for now that reduces uncertainty in the long run,” Kleffner said.
John Furlong, who headed the Vancouver Olympics organizing committee, said the 2010 Games did not have any cost overrun insurance. The Vancouver Games ran into overruns while building their athletes’ village, which Furlong blames on an overheated construction market and the impact of the global financial meltdown.
“The size of the contingency in the Calgary budget — I have never seen one this strong,” Furlong said. “It’s far beyond anything I have ever seen, and it’s way higher than the one we had in Vancouver. So the level of protection this budget has, before you even dial in this insurance, is extraordinary.”
In addition to the proposed cost overrun insurance, Calgary 2026 would also be seeking several other insurance policies in the event of a successful bid. These policies would provide coverage for a range of other risks — everything from countries boycotting or not participating; technical malfunctions affecting TV broadcast; or outright event cancellation due to war, terrorism, or a global pandemic.
Calgary 2026 spokesperson James Millar said it is too early to say what these policies would cost, as potential risks will need to be assessed closer to the start of the Games. “There are so many variables on coverage choices,” he said in an email. “What we choose to cover and how much is based on risk profile at the time for each instance.”
There is some real attraction in the idea of buying something that they can budget for now that reduces uncertainty.