The sports insurance business is expected to reach $600 billion by 2025

The global growth of the professional sports industry, coupled with different types of insurance needs, has led to the exponential growth of the sports insurance business over the past few years.

DBRS Morningstar expects it to continue to grow and reach revenues of $600 billion by 2025. Lloyd’s currently has over £150 million of premiums written in sports-related accident and health policies alone.

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

The analysts said: “The insurance needs of professional players and teams are very complex and require specialist cover, which is mainly provided 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 that 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 event cancellation.

Stratum, by SIA Partners

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

Professional teams can obtain key player disability insurance to protect themselves financially as they may be obligated to continue paying the salary of an injured player 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 supplemental disability insurance to protect against a career-ending injury.

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

Many cases in history have provided valuable information for sports organizations looking to reduce losses from event cancellations. What’s more, the insurance industry has the expertise and capital to provide significant coverage for professional stadiums and arenas, as well as major events such as the Olympics and World Cups, analysts noted.

The rating agency added: “DBRS Morningstar expects that business interruption and event cancellation insurance will 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 insurance values ​​of national teams and have used this 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 is made up of various indicators such as current and future wages, sponsorship, age and position on the pitch. With the support of the Center for Economic and Business Research, Lloyd’s successfully predicted the outcome of the 2014 and 2018 FIFA World Cups based on the estimated collective insurance values ​​of the national teams participating in the tournament.

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

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

The rating agency concluded: “DBRS Morningstar notes that the Lloyd’s estimate of a player’s insurable value used for the World Cup forecast is not necessarily linked to that particular player’s current insurable value, but is simply an estimate of their potential retirement income based on current salary, income growth potential and endorsement income. According to Lloyd’s, this is a good proxy for the performance of players and national teams at the World Cup.

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