German insurer wrongly bet on who would win World Cup
‘Clearly our data was wrong,’ says an executive at Allianz, one of the biggest insurers of soccer’s most important contest
Allianz SE is one of the biggest insurers of the World Cup. But it missed out on a golden opportunity when defending champion Germany exited the tournament last week.
Before the start of soccer’s most important contest, retailers offered sales promotions or prizes that would pay out if Germany took the crown again this year. To cover the potential payments, those retailers asked Allianz for insurance. The German insurer declined, betting a high likelihood of a victory for its home country, and passed up potential revenue.
“Clearly our data was wrong,” Peter Williams, a live entertainment executive for a commercial insurance unit of Allianz, said in an email. “But prior to the event, I think anybody thought Germany was a favourite.”
The decision was one of many bets made by large insurers as part of the global sporting event taking place in Russia.
The insured value of the World Cup is estimated to total between $6 billion and $7 billion, according to estimates provided by commercial insurer Beazley PLC. That is higher than the estimated $5 billion value of insurance provided as part of the 2014 World Cup in South Africa.
The policies in place for 2018 cover everything from the possibility of terrorism to player injuries to cancellations.
“There is a very broad range of risks,” according to Adrian Beeby, spokesman for AEGIS Managing Agency Ltd, an insurer that operates as part of the Lloyd’s of London insurance market and is providing World Cup-related coverage this year.
The push to insure every aspect of the World Cup is part of a larger global market covering risks posed by large events. Many band tours, art exhibitions, business conferences, music festivals, and political conventions are insured.
Few of these events can rival the World Cup in scope. The 31-day soccer tournament is held in 11 cities across Russia this year, with 32 teams playing 64 matches.
“The World Cup is probably one of the biggest insurable events because of the global reach of the teams which are playing and the sheer size,” said Mr. Williams in a phone interview.
Allianz made a number of bets as part of this year’s World Cup. Retailers also asked Allianz to insure them against a Cup victory for Poland, which Allianz accepted. That turned out to be a good bet since Poland is out of the tournament.
Allianz hopes to make profits from wagers on other teams.
Allianz separately helps insure FIFA, soccer’s world governing body, and various national teams including Germany, according to its website. It also covers stadiums and local infrastructure in Russia, and it provides health and travel insurance to fans.
Another risk Allianz and other insurers offered to cover this year was the prospect of an event being cancelled or moved. Those policies across the industry are expected to total up to $1.5 billion, which includes TV rights and sponsorship, according to estimates from Beazley.
Terrorist attacks and cyberse- curity are other concerns that attract coverage, as do fears that a player could be removed from action because of an injury or an accident. For a star player, the insured amount could be up to $200 million, according to Beazley. Each team typically buys such coverage, Beazley said.
Those covering the event or hoping to profit from its global reach — like broadcasters, merchandisers and advertisers — look to insurers to protect their own stakes in the contest. Makers of country-specific T-shirts, for example, want policies to cover their risks in production and transportation of the garments, according to Mr. Williams of Allianz.
“You don’t think about that, but that’s millions of dollars worth of T-shirts being made somewhere and then being sent around the world,” Mr. Williams said. “It’s billions of dollars of premiums flying into the insurance market.”