Terrorism, cyber and reputation the big risks at Paris Olympics

With geopolitical tensions on the rise, cyberattacks mounting, and high levels of domestic polarisation, it hardly seems the ideal time for Paris to host the Olympic Games. But at least the organisers will almost certainly avoid a global pandemic that forced the world’s largest sports event to be cancelled in Tokyo back in 2020.

While Covid-19 is no longer the threat it was, other major risks loom large. Companies participating in the Paris Olympics must be ready to manage significant exposures to terrorism, cyber and social unrest, said Matthieu Jen, the head of Southern Europe at Control Risks.

They should also be mindful of the impact on their reputations. Jen warned that, with protests mushrooming all around the world against a myriad of targets, companies may find themselves targeted by activists and urged to take a position that they may later regret.

“The Games will provide ample opportunity for activists to make their points about issues such as climate change or the conflict in Gaza,” Jen said. “Companies and sponsors must make sure that they are ready to face the potential of reputational risk. For example, by avoiding ineffective communication between staff members.”

Two weeks of intense competition in one of the world’s most glamorous cities also runs the risk of terrorism. More than 15 million tourists are expected to visit the French capital during the course of the event. It will be covered by 6,000 journalists with an expected TV audience of four billion, according to France’s Interior Ministry. The sporting events will be hosted in 40 different locations spread around 19 municipalities, mostly in the Îlede- France region.

The threat of terrorism will be particularly high during the opening ceremony on 26 July, which, unusually, will not take place in a big stadium but along a 6km stretch of the River Seine. The Parisian police estimate that 326,000 people will attend the ceremony, in addition to 10,500 athletes who will board 94 boats, and hundreds of heads of state and other authorities. “The threat level this time will be totally different from having everybody inside a stadium for the opening ceremony,” Jen said.

Security experts have described preparation for such an ambitious celebration as a logistical nightmare, but the Parisian police have made plans. Among other measures, access to the area hosting the ceremony will be restricted for eight days before it begins, and completely shut down, except for security forces, from 1pm on the day. The police will assign 45,000 agents to boost security at the opening ceremony.

Thirty thousand police men and women will be active daily on the ground during the games. But safety concerns have led the French government to offer private security firms financial incentives to deploy more agents.

The Interior Ministry launched a series of tenders, in which around four dozen companies were selected to employ 25,000 private agents each day during the Summer and Paralympic Games. Recruitment has been a challenge. According to newspaper Le Monde, by mid-April there was a shortfall of 8,000 to 9,000 agents. However, industry spokespeople have assured that the situation is now under control.

Jen noted that terrorism is not the only security threat. Pickpocketing and other petty crimes should also rank high on risk maps, as well as the possibility of supply chain disruptions due to industrial actions by combative French unions. And much emphasis has been rightly put on cyber risks, pointed out the expert.

“The cyber threat in Paris is totally different from what it was in Tokyo or Rio de Janeiro,” said Jens. “There will be much more exposure on that front, both from activists and cyber criminals.”

The Olympic Games organisers have set up a cybersecurity hub to try and mitigate the risk of attacks by criminals or state-sponsored hackers. France’s cybersecurity agency ANSSI has been deeply involved in this preparation.

But the authorities will have their work cut out for them. Cybersecurity consultancy Outpost24 estimates that the Tokyo Games were hit by 450 million cyberattacks in 2021, and there is no reason to believe hackers will be less aggressive this time around. But in early May, the consultancy said that the level of preparation from the Paris 2024 organiser is “pretty good”.

“Not quite a gold medal, but certainly a silver,” wrote cybersecurity specialist Marcus White in a report.

With so many risks involved, and so much money relying on its success, the Olympic Games are a big deal for the insurance industry. In 2020, news agency Reuters reported that total coverage for the Tokyo Olympic Games reached $2bn, quoting estimates by equity research firm Jefferies. The biggest cover placed by the organisation is event cancellation, which four years ago had a limit of $800m, according to Reuters.

The International Olympic Committee (IOC) has been typically secretive when it comes to its insurance arrangements. We do know that after the Tokyo Games a new global insurance contract between the IOC and German insurer Allianz kicked in, covering the period between 2021 and 2028.

According to sources, the contract was signed before the pandemic. It is unclear, however, whether Allianz has taken the even cancellation cover.

The IOC is not the only entity interested in purchasing event cancellation insurance. Broadcasters, for example, have huge exposure to the Olympics and have been known to look for protection in insurance and reinsurance markets.

If they signed their current policies after the pandemic, they are unlikely to have obtained protection for cancellation from communicable diseases and other events that underwriters have shunned in recent years.

“After the pandemic, the contingency market lost some players but gained others that saw an opportunity to get in,” said Simon Henderson, an executive partner of Special Risks at broker Alesco Risk Management Services. “Communicable diseases and cyber have been excluded, wordings are tighter, rates have gone up.”

Despite the post-pandemic recovery, underwriting remains restrictive, and buyers must fork out more money for lower levels of protection as a result. “Those who are trying to buy cover now will meet very limited capacity and, if there is any capacity available, they will find chunkier rates,” Henderson pointed out.

It is not clear either whether the IOC was able to get cover against a new pandemic.

When the contract with Allianz was signed, communicable diseases could be written back into event cancellation policies, but neither Allianz nor the IOC have divulged whether their contract includes such protection.

“Allianz is the official insurer of the Olympic Games. That means that the organisers and the brokers that launched tenders for insurance covers have the obligation to consult us,” said Fabrice Michel-Villaz, the head of Olympics and Sport at Allianz France. “But that does not mean that we will insure all the games’ risks. We decide what risks we will accept or not according to our risk appetite.”

Allianz has picked up a wide range of risk transfer deals mandated by the contracts signed between the IOC and the Paris 2024 organisers. Michel-Villaz said these include civil liability, fleet and cyber insurance programmes, as well as standalone policies linked to areas such as crime, ticketing, repatriation and ten-year liability covers for the construction of new buildings.

Assistance arm Allianz Partners covered ticketing, repatriation insurance and complementary health for workers. Allianz Global Corporate & Specialty was in charge of the likes of cyber and large risks, Michel-Villaz said.

The sums involved were not disclosed by the IOC or the insurance partner. But a model of the host city contract drafted by the IOC in 2018, after Paris was awarded the Games, says that general liability insurance must be purchased with limits of at least $250m, and PI cover for at least $100m, both on a claims-made basis.

D&O limits per claims cannot be lower than $5m, and in the case of medical malpractice the floor is $25m “per occurrence and on aggregate”.

The document shows that local organisers are also required to buy covers like medical treatment and repatriation, property insurance for venues, construction all risk for new buildings, motor liability – including for watercraft and aircraft, personal accident, crime, fidelity and fraud.