English football (soccer) matches resumed at the beginning of August with Manchester United, last season’s Premier League champions, favored to repeat this season.
Like its counterparts in the U.S. – major league baseball, the NFL, the NBA, etc. – professional sports are big business in the UK as well as in Europe and the rest of the world, where soccer football reigns supreme as the most popular sport.
The second most popular sport in the UK is probably rugby – the ancestor of American football – just as rough, but with neither the excessive delays nor all the body armor.
In gearing up for a very long season – it starts in August and ends in June with no winter break – English football clubs spend the summer months transferring players, hiring new players and adjusting their teams. All of which means that it’s also a busy time for Lloyd’s sports underwriters.
Duncan Fraser, a partner at insurance broker Jardine Lloyd Thompson in an article on the Lloyd’s web site, explained that most football clubs renew their insurance to coincide with the end of the “transfer window”* on September first. “There is a lot of activity at this time of year,” he noted; “with players moving clubs we tend to see many more requests for insurance.”
Lloyd’s points out that football clubs buy large amounts of insurance – “to cover their stadium, spectators and players. Underwriters insure more than £1 billion [$1.62 billion] of football related risk in the UK alone, with many of the 3,000 professional players buying insurance. The majority of the 500 players in the Premier [League] are insured for between £5-£25 million [$8.1 to $40.5 million].”
Clubs in the top divisions typically buy insurance to protect their investment in their players, said Roland Fox, Underwriter at MAP Underwriting. Clubs can insure against the loss of multi-million pound transfer fees if a player is unable to play because of a career ending injury or illness. They can also buy insurance to pay salaries should a player suffer a temporary injury or illness.
“If a club has spent millions in the transfer market buying a player, they will want to protect their balance sheet,” Fox explained. “Premiership clubs buy personal accident insurance for a career ending injury, and some also buy insurance for temporary disablement.”
Transfer fees, i.e. the amount paid by one club to buy the contract of another club’s player, are often quite high. The record so far is the £80 million ($130 million) Real Madrid paid Manchester United for star striker Christiano Ronaldo in 2009. Nobody knows what Lionel Messi might be worth, even if Barcelona were ready to sell him.
In addition football players’ salaries have skyrocketed over the years, which also increases risks and exposures. Fox indicated that the gap between premiums and liability has been widening. Medical advancements mean that claims are now less likely, but a large loss would have a significant impact on the personal accident insurance market.
Even though catastrophic injuries both on and off the field, remain fairly rare, they do happen, and they can end a football player’s career and future earnings. Fraser explained that underwriters provide cover for players both on and off the pitch [field], and although policies typically exclude activities like extreme sports and piloting helicopters, these can also be insured at Lloyd’s.
Players also may purchase their own insurance to cover lost income as a result of an accident, illness or injury, he added. Typically, a top player will buy up to five times their earnings.
The Lloyd’s market “pioneered personal accident insurance for professional players over two decades ago and remains a leading market for covering sports such as football, rugby, basketball, baseball and American football,” Fraser explained. Lloyd’s is “particularly strong at insuring sports that involve high values or high risk, because of the need for underwriting expertise and the syndication of risk.”
In fact Fraser added, a number of syndicates are usually involved as high value Premiership players command transfer fees in the tens of millions of pounds, and this requires as many as 10 or more syndicates to share the risk.
In addition to the major leagues, there are literally thousands of local football clubs, both professional and amateur who need to “buy a range of coverage to protect their grounds and players, as well as covering their liabilities,” explained Murray Anderson, Active Underwriter at Sportscover syndicate 3334.
Many clubs in local leagues buy insurance to cover medical costs and treatments should a player be injured while playing for the team, he added.
Amateur and semi professional players suffer the same injuries as professional players, but the risks are probably even greater. Playing fields in the lower leagues are not as well kept and players do not have the same training and medical support, he continued.
Anderson also pointed out that the start of the football season is “a particularly risky time, and typically leads to rise in the number of accidents. Players in local leagues do not have the same fitness levels as, say, Wayne Rooney [Man United’s star striker], but they go out at the start of the season thinking they do and then snap their Achilles or pull a hamstring.”
Players aren’t the only people in football who are exposed to risks. He indicated that local clubs are increasingly buying directors’ and officers’ insurance for committees. There are also more clubs buying professional indemnity and errors and omissions insurance for coaches and referees.
“There have been issues in the past where players have sued clubs over allegations of harassment, allegations of drug taking or even where they have not been picked for the team,” Anderson explained. Over time we have seen society grow more litigious and committee members put their own livelihoods and personal assets at risk.”
Source: Lloyd’s of London
* the “transfer window” refers to the time during which players may be bought and sold between European clubs. It extends through the summer months until midnight August 31st, and reopens briefly in January and early February.
Topics Excess Surplus Underwriting Market Lloyd's
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