April 17 (Bloomberg) -- The Boston Marathon bombings may cause a surge in the cost of insuring global sporting events, while changing the way organizers manage risk, according to Bob Murphy, global entertainment and events practice leader at Marsh & McLennan Cos.’s Marsh Inc.
“This has absolutely shaken sports industry underwriters,” Murphy said in a telephone interview. “People are asking, ‘Do we even want to underwrite these events? If we do, what are the underwriting data that we need to see to protect our risk? We’re going to have ramifications in terms of limits and pricing.”’
While event planners and risk managers reevaluated protections at arenas and stadiums after the Sept. 11, 2001, terrorist attacks on the U.S., the marathon is designed as an open festival, similar to a parade and hard to secure across its 26.2-mile (42.2-kilometer) course, Murphy said. Two powerful explosions disrupted the 117th edition of the Boston race two days ago, killing at least three people and injuring more than 175, about 2 1/2 hours after Lelisa Desisa of Ethiopia crossed the finish line to win the men’s title.
Policies are likely to become more expensive for sports events because of their high concentration of people, said Mike Price, president of Atlanta-based ESIX, an entertainment and sports insurance company that works with USA Track and Field among other clients and has in the past worked with the Boston Marathon. Price wouldn’t disclose whether ESIX and the Boston race currently are working together.
The events of Sept. 11 led insurance companies to exclude terrorism coverage, causing air carriers to complain that they were unable to operate under those conditions, said Price. U.S. terrorism coverage is now essentially backed by the federal government and considered an exclusion that event organizers have to elect in their coverage terms, he said.
That cost, now less that 5 percent of most policies, will rise and the list of organizations considering terrorism coverage will expand from the big leagues to smaller events, said Price.
“It’s going to filter down,” Price said in a telephone interview. “Already I’ve gotten calls from smaller organizations this morning that are saying, ‘Wow, what about us? Have we got exposure?”’
Steve Lastoe, the founder of New York-based foot race organizer and race-management service NYCRuns, was volunteering at the start line in Hopkinton two mornings ago when a bomb squad went by to sweep the area.
“I was surprised,” Lastoe, whose company runs three marathons and several shorter races in the New York area, said in a telephone interview. “I hadn’t thought about it before, to be honest with you. When we worry about safety, we worry about medical safety.”
The additional costs of terrorism coverage could be prohibitive, said Price.
“It could easily force a lot of smaller operators out of business,” he said in a telephone interview. “There are tons of events out there that have no idea that there is no terrorism coverage in place.”
Scott Dickey, president and chief executive of Competitor Group Inc., which owns and operates more than 83 events around the world including the Rock ‘N’ Roll Marathon Series and the Women’s Running Series, said any public event has risks and insurers won’t abandon endurance sports, where participation is at an all-time high.
“That’s just hogwash,” he said. “Underwriters are not walking away from marathons.”
Murphy said his industry had already begun using lessons from Boston to improve safety at sports events, parades or concerts.
“There’s no choice but to take the lessons learned and improve from a risk management standpoint,” he said. “There will be a Boston Marathon in 2014. There’s no doubt about it. And my guess is, there will be a record number of participants.”
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