Munich Re has up to $400 million on the line insuring against delays or cancellations of World Cup matches. The world’s largest reinsurer is counting on Brazilian President Dilma Rousseff to do whatever it takes to avoid the embarrassment that would result from interruptions.
The company is confident events ranging from street protests to strikes to failing infrastructure won’t disrupt play, Andrew Duxbury, a London-based underwriting manager, said last week in a New York interview moments before the opening match. The firm has experience insuring sporting events such as the 2010 World Cup tournament in South Africa and the 2012 Olympic games in London.
“I’m sitting here as comfortably as I was at this stage prior to the South African World Cup,” Duxbury said. “There’s an alignment of interest. The primary issue for Brazil is the legacy reputation. They want everyone to leave having had a great experience and promoting Brazil as a country.”
Duxbury’s optimism clashes with the assessment of Jerome Valcke, the general secretary of FIFA, who said last month that his organization had “been through hell” trying to arrange the event in Brazil. In recent weeks teachers and police officers have walked off the job demanding pay raises in the run-up to the World Cup, while strikes by transit workers have worsened traffic snarls in the country’s biggest cities.
In a victory for Rousseff, Rio de Janeiro airport workers didn’t strike last week after a court said it would fine the labor union 500,000 reais ($223,900) per hour. Sao Paulo’s metro union decided not to resume a walkout as Brazil’s biggest city held the tournament’s opening game, a 3-1 triumph for the host country over Croatia.
Munich Re, whose customers include organizations that sell television rights as well as local governments, will pay if there’s a delay, relocation or cancellation of one or more games caused by unforeseen events, from civil unrest to torrential rains.
Mass civil disobedience is the greatest threat to the games’ insurers, according to Duxbury. The World Cup’s $11 billion price tag has angered Brazilians faced with quickening inflation, slowing growth and poor public services. Yesterday, a group of about 300 protesters in Sao Paulo clashed twice with police about 13 kilometers (8 miles) from the stadium where the opening match was held.
“If the civil unrest spread, then ultimately it would be the government’s call to say, ‘We need to get a handle on this, we can’t hold the World Cup anymore,'” he said. “There’s no sign of that happening.”
Duxbury estimates the tournament is covered for as much as $2 billion through multiple insurers.
Rousseff was jeered before the opening game, with fans taunting her with expletive chants before the opening whistle. The scene was a repeat from last year, when Rousseff was heckled before the start of the Confederations Cup.
The country is “completely prepared,” Roberto Jaguaribe, Brazil’s ambassador to the U.K. and Ireland, said in an interview with Bloomberg Television today.
“Of course we will not have the infrastructure that countries of most parts of the developed world have,” he said. “Everything is going to go perfectly well, so nobody is going to recall preparations were off at some stage.”
In 2010, about half the world’s population watched some of the South African games, which each attracted about 188 million viewers on average, according to Munich Re.
“As long as the players and the TV cameras are there, that’s all we need,” Duxbury said.