Boston 2024 to buy insurance for summer games
By State House News Service | July 23, 2015, 12:01 EST
Written by Andy Metzger
STATE HOUSE, BOSTON, JULY 22, 2015…..Once billed as the most walkable Olympic Games, Boston 2024 is now pitching its proposal as the most underwritten.
“The risk management program is designed to minimize the possibility of costs being incurred by taxpayers,” Boston 2024 Partnership wrote in a risk management and insurance overview expected to be released Thursday. “Through the four-pillar approach described above, Boston 2024 expects to use insurance in a more comprehensive way than in any prior Olympic and Paralympic Games in history.”
While the organizers don’t plan to actually purchase most of the policies before Boston’s potential selection by the International Olympic Committee to host the 2024 Summer Games, they have outlined significant outlays to protect against risks ranging from loss of appeal to terrorism.
“Just as it would be premature to purchase auto insurance before buying a car, it is premature to acquire most of the insurance described above unless and until awarded the Olympic and Paralympic Games,” read the document, which credits Heidi Lawson, head of Mintz Levin’s Crisis Risk Management and Executive Protection Practice, with leading the risk efforts.
Against some intense skepticism, proponents of the Olympics have pledged that the competition would be a privately financed endeavor, and the tens of millions in insurance premiums would also be funded by private funds, according to the document. The insurance coverage would still extend to the city of Boston and the state in some cases, according to Boston 2024.
The multi-billion Boston 2024 plan has “conservatively” estimated $128 million in insurance premiums that would pay for, among other products, $500 million in coverage for costs associated with event cancellation, $100 million in coverage for damages owed to the International Olympic Committee if Boston cannot follow through on its obligations, and $350 million in case ticket sales or advertising lags. The plan also includes $500 million in umbrella coverage. The Olympic organizers would pay $60 to $90 million for $500 million of liability coverage.
Boston 2024 has been questioned in the past for falsely claiming transportation projects were in the state’s construction pipeline and for omitting the cost of public air rights in the planned development of Olympic Stadium and the area around it.
The release of the risk management overview will come at an opportune time for Boston 2024, whose chairman, Steve Pagliuca, will on Thursday evening join U.S. Olympic Committee board member Daniel Doctoroff to debate Boston Olympics opponents Chris Dempsey and Smith College economist Andrew Zimbalist. The overview will offer Pagliuca a freshly released document to defend against charges by Dempsey and Zimbalist that cost overruns are likely and taxpayers will be left holding the bag.
The games’ backers claim their cost and revenue projections have been “pressure-tested with a variety of experts,” and they included the endorsement of two risk and insurance professionals at the end of the document.
Willis Group Holdings Executive Vice President Glenn McGrath said Boston 2024’s insurance plan is “attainable and feasible, and the premium price estimates are conservative and appropriate.”
Aon Risk Solutions Executive Vice President Randy Nornes said the bid team had “clearly studied” risk management approaches of prior host cities and predicted “the world’s insurance markets will enthusiastically support the Boston bid.”
Gov. Charlie Baker and top lawmakers hired The Brattle Group to provide a state-sponsored independent analysis of the entire bid, which Baker said would focus on compensation for the state, the state-funded infrastructure projects Boston 2024 is expecting and cash management.
Boston 2024 said the estimated $4 billion cost of infrastructure around the proposed Olympic Stadium and the construction of the Athletes Village has $400 million in contingency.
The estimated $4.8 billion operating budget would have $210 million in contingency and venue construction would have $54 million in contingency. Each venue budget includes a contingency of up to 15 percent, according to Boston 2024.
Boston 2024 is also developing a plan to fund any deductibles related to the insurance.
On the largest venues – the Olympic Stadium at Widett Circle in Boston and the Athletes Village on Columbia Point – the development could include capital replacement insurance, which protects against default by the contractor and other contingencies.
Boston 2024 also plans to use contracting techniques to protect against overruns, including “guaranteed maximum price,” according to the planning document.
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