Sports-Related Brain Injuries Are Emerging Risk for US & UK Insurers: S&P Report

August 1, 2016

Sports-related brain injuries are one of the top emerging insurance claims in the U.S. and the U.K., according to a report published by S&P Global Ratings.

While the potential risk of such liability claims is rising rapidly, S&P did not believe they would reach the magnitude of asbestos-related claims, partly because U.S. insurers have learned from their experience of asbestos-related claims, and are “increasingly drafting exclusion clauses.” And U.K. insurers are likely to follow suit.

“…[E]ffective emerging risk management – how insurers prepare for risks that do not pose an immediate threat to their creditworthiness, but could do so in future – will prevent the ultimate cost of claims for sports-related brain injuries reaching the same level as that for asbestos-related claims in the U.S. and the U.K.,” said S&P’s report.

A recent string of lawsuits, including the high-profile class action brought against the U.S. National Football League (NFL), has highlighted the potential risks for insurers of sports-related brain-injury liability claims.

In April 2015, a settlement of nearly $1 billion was awarded to 20,000 former NFL players who retired prior to July 2014 and “now suffer from various progressive degenerative brain diseases, such as amyotrophic lateral sclerosis and chronic traumatic encephalopathy,” S&P continued.

“Although the impact of the settlement on liability insurers is unclear, they are still worried,” said the report titled “Good Emerging Risk Management Can Help Prevent the Rise of Sports-Related Brain Injury Insurance Claims in the U.S. and U.K.”

“Under the terms of the settlement, NFL could be liable to pay up to $5 million to each player with a serious brain condition associated with repeated head trauma,” it said, noting that relatives of players with brain condition who died between January 2006 and April 2015 are entitled to cash payments of up to $4 million.

The overall amount of the entitlement ultimately could rise as a number of former players are appealing the settlement “as they do not believe that it adequately compensates for the effects of their injuries. The amount could increase after appeals, and no money will be paid out until all appeals are exhausted.”

Rising Number of Concussions

NFL players sustained 271 reported concussions in 2015, a 32 percent rise over the 2014 season and the highest number in the NFL’s four years of record keeping. “NFL-affiliated doctors attribute the spike to players’ increased awareness of the importance of reporting concussion and the vigilance of club staff.”

On the other hand, S&P said the Concussion Legacy Foundation (CLF), which is a group dedicated to the study, treatment and prevention of brain trauma in athletes, believes the number of reported concussions is fairly accurate and may be even higher – but is only now coming to light.

Alarm Bells for U.K. Insurers

While legal action involving sports-related injuries is uncommon in the U.K., S&P warned that cases also may increase in the U.K. – because awareness also is on the rise.

“The Sports Collision Injury Collective recently highlighted the dangers of sports-related concussion in an open letter to government ministers, chief medical officers and children’s commissioners,” requesting a ban on collisions in rugby played in British schools, the report said.

In addition, there are been a series of high-profile cases, which have captured media attention. Just one of those cases involved Jonathan Thomas, a forward with the Welsh national rugby union team, whose diagnosis of epilepsy was “thought to be the result of multiple head traumas” during his career. He retired from the sport in September 2015.

Another alarming statistic from U.K.-based law firm Clyde & Co. is the 41 percent increase in the number of reported rugby-related head injuries in 14-to-18 year-old children. “Such cases could translate into future insurance claims.”

Learning from Asbestos Claims’ Experience

S&P does not believe that sports-related brain-injury claims will match the scale of asbestos-related claims for mesothelioma and asbestosis in the U.S. or the U.K., although there are similarities between the two types of claims.

First, the number of people who potentially have sports injuries is huge, “comprising professional and amateur players of rugby and American football, as well as players of other sports in which helmets are worn to prevent head injuries,” the report said.

“Like the lung damage that results from asbestos inhalation, brain damage is a latent injury that may worsen over time and only manifest years, or even decades, after it was first sustained,” it added.

“Producers, manufacturers, distributors and installers were all targets of asbestos-related claims…,” the report explained. “Similarly, there is a wide range of potential targets for sports-related brain-injury claims, including athletics organizations, individual sports teams, educational establishments, helmet manufacturers and retailers.”

The report quoted the American Insurance Association, which has estimated the total cost of all past, present and future U.S. asbestos-related claims to be between $200 billion and $275 billion. The potential cost of U.K. asbestos-related claims to the U.K. insurance industry from 2009 to 2050 could be around £11 billion ($14.3 billion), according to the Asbestos Working Party in the U.K.

Concussion Exclusions

S&P suggested that U.S. brokers and insurers have learned from their experience of asbestos-related claims and have started to draft “concussion-exclusion clauses for policies issued to school districts,” as an example.

“[S]ome U.S. insurers have reported using a special aggregate that caps concussion lawsuit payments on a per sports association or per insurance program basis,” the report noted. “Other U.S. insurers have started using a special endorsement that voids coverage for concussion lawsuits unless risk-management controls, such as mandatory coach concussion training, have been put in place.”

In the U.K., the industry can also become involved in “setting enhanced monitoring and prevention standards in response to the escalating risk… and in supporting initiatives to ultimately reduce claims and litigation exposure.”

The U.K. insurance industry is well placed to make a difference, S&P said, because many companies are sports sponsors. Further, the industry “can drive change by setting more restrictive terms for relevant insurance contracts.”

If the problem is tackled now, the effect of rising legal claims in the U.K. will be minimized, the S&P report went on to say.

S&P suggested that “effective emerging risk management – how insurers prepare for risks that do not pose an immediate threat to their “will present the ultimate cost of claims for sports-related brain injuries reaching the same level as that for asbestos-related claims in the U.S. and the U.K.,” said the report.

Source: S&P Global Ratings

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