But that international spotlight also makes the 2008 Summer Olympics in Beijing--scheduled to open on Aug. 8 and continue through Aug. 24--a target for political protests and terrorist threats.
Already, activists seeking to pressure China over its role in Tibet have disrupted the Olympic torch relay, and more protests are expected during the games and in the days leading up to them. One scenario has the Chinese government overreacting to protests at the games, provoking countries to pull out of the games in outrage.
"As an underwriter, you don't want to see all these protests ... people trying to disrupt the torch and suggesting they might try to disrupt the games," one industry source says.
"Plus, the fact that it's a country with such a repressive government raises concerns," he says.
Heavy security should help to keep these threats under control at the games, according to an April 2008 report titled "Risks to the 2008 Beijing Olympics" issued by London-based political risk analysts and forecasters Exclusive Analysis Ltd.
"We assess that heavy security is likely to prevent a terrorist attack and large-scale protests from being carried out against Olympic venues, although attacks by separatist groups and protests arising from socioeconomic grievances are likely in the western and rural regions," wrote the authors of the Exclusive Analysis report.
In addition to the political risks, Beijing is also vulnerable to a number of other risks, such as earthquakes, sandstorms and communicable diseases. Any disruption that forces the cancellation or postponement of an event, or the games themselves, would result in millions of dollars in losses for organizers as well as sponsors and media companies.
China is pouring massive resources into security to make sure the games go off without a hitch. But even the most careful planning can only go so far. Many organizations will protect themselves from the risk of cancellation with insurance coverage.
RISKS PARTICULAR TO CHINA
Every Olympic Games has its own particular set of risks. For the 2008 Summer Olympic Games, there are both political risks as well as natural catastrophe risks--and many of them have been grabbing headlines over the past few months.
In the political arena, Tibet has become a focal point as activists protest China's policies on Tibet and on human rights. Anti-Chinese riots broke out in March in Tibet's capital of Lhasa, and there have been protests outside Chinese embassies worldwide.
The Chinese government claimed in April that Tibetan separatist groups were planning suicide attacks to disrupt the Olympics, according to the Exclusive Analysis report.
"The unrest in Tibet is unlikely to escalate into nationwide large-scale rioting, and risks of an attack on Olympics venues are limited; nonetheless, in pushing for the Tibetan cause, activists are increasingly likely to adopt more self-harming methods of protest," according to the Exclusive Analysis report.
"Protests in support of Tibetan demands for independence, media and religious freedom are likely against Chinese embassies, and companies associated with the Olympics are likely to confront sustained negative publicity in the international media before the games," the report concluded.
The Chinese government has challenges on other fronts as well. It claims, for instance, that Uyghur separatists are also seeking to disrupt the games.
China says it uncovered a plot by Uyghur separatists to conduct suicide bomb attacks on Chinese cities and conduct kidnappings in Beijing to disrupt the games. The activists claim the Chinese government fabricated these terror plots to prevent people in the region from voicing their grievances.
Uyghur separatist groups are unlikely to successfully penetrate the Beijing, Tianjin and Qingdao Olympic venues, thereby raising the likelihood of an attack on China's western cities, including Urumqi, Lanzhou and Xining, according to Exclusive Analysis.
Public transport facilities, including buses and trains, are more vulnerable targets.
Other political risks outlined by Exclusive Analysis include protests outside Chinese embassies by international nongovernmental organizations, ethnic rights groups and overseas Chinese dissidents up to and throughout the Olympics, along with calls by international NGOs for a boycott of Chinese and foreign brands associated with the Beijing Olympics.
Beijing also faces other potentially catastrophic risks, including earthquake, sandstorms and communicable diseases.
"China as a whole is highly susceptible to natural hazards, and in Beijing earthquake risk is a particular concern," says Domenico del Re, senior model manager and an expert on Asia Pacific natural hazards at Risk Management Solutions Inc.
The greatest earthquake to affect Beijing was the 1679 Sanhe-Pinggu Earthquake, according to RMS. The epicenter of this magnitude 8.0 quake was just 31 miles from the center of Beijing. In 1976, the magnitude 7.8 Tangshan Earthquake struck 87 miles to the east of Beijing, killing more than 240,000 people, according to RMS.
"If we look at historical events and project how they would impact the city today, given the huge property and manufacturing boom, our model shows a major earthquake could cause economic losses of as much as $100 billion," del Re says.
"Earthquake is a catastrophic risk that will be front of mind for the organizers of the Beijing Olympics," he says.
The epicenter of the magnitude 7.9 earthquake that devastated Sichuan in May was more than 1,000 miles away from Beijing, but it served as a reminder that a natural disaster can strike at any time.
While earthquake is one of the biggest concerns, sandstorms could pose another problem.
Pollution levels, for instance, rose sharply in Beijing in late May less than three months before the games, prompting authorities to warn residents with respiratory problems to stay inside.
The air quality was rated "heavily polluted" due to a sandstorm from Mongolia, according to a Reuters report, though such sandstorms usually hit the city in March and April, not August when the Olympics are scheduled.
Communicable disease is another concern.
Hand, foot and mouth disease due to enterovirus 71 broke out among infants and young children in Fuyang city, Anhui Province, in early May. The province is south of Beijing. As of May 5, there were a total of 4,486 cases recorded by the World Health Organization, including 22 deaths.
Even so, the highly infectious virus was unlikely to be a threat to the Beijing Olympics, according to an Associated Press article citing the WHO.
"I don't see it at all as a threat to the Olympics or any upcoming events. ... This is a disease mainly affecting young children," WHO China representative Hans Troedsson said during a news conference, according to the Associated Press report.
WHO advised against any travel or trade restrictions related to China, but reinforced the need for prevention through enhanced personal hygiene.
Then there's H5N1 avian flu.
The WHO's Web site shows there have been 30 cases of avian flu reported in all of China since 2003, three of them so far this year--and 20 of them ended in death. The WHO denies, however, that it is recommending that visitors to the Olympic Games pack an antiviral drug to protect themselves against the avian flu, according to a Canadian media report.
The denial comes in the wake of a report by the Italian news agency Ansa, which said WHO was warning Olympics tourists to Beijing to arm themselves with the drug Tamiflu. The WHO said the report was erroneous.
EVENT CANCELLATION INSURANCE
To protect themselves against these kinds of unforeseen catastrophic events, organizers, sponsors and media companies will often purchase event cancellation insurance.
The International Olympic Committee purchased event cancellation coverage for the first time in 2004 for the Athens Games. At the time, the governing body confirmed that it bought $170 million of cover, and reports suggested that the IOC paid a premium of around $6.8 million.
Jacque Rogge, IOC president, confirmed at the time that the IOC planned to arrange for similar cover for the Summer Olympics in Beijing in 2008 and the Winter Olympics in Vancouver in 2010. It also bought coverage for the Winter Games in Turin in 2006.
"The IOC placement got a lot of publicity because it was a change in their buying philosophy," says Lori Shaw, head of the sports and leisure practice at Aon Risk Services.
The stakes for the IOC are huge. Revenue from television rights rose from $101 million for the boycotted Summer Games in Moscow in 1980 to more than $1.7 billion for this year's Summer Games, according to the IOC's annual report.
For the Winter Games, television revenue shot from $21 million for Lake Placid in 1980 to more than $832 million for the events in Turin two years ago.
In 2001, the IOC could have only functioned for 18 months in the event of a cancellation. Today, the IOC has enough in reserve to last it at least four years should the need arise. Put simply, the Olympic Games cannot be allowed to fail.
Details of the IOC's insurance coverage and the premium paid for the 2008 Beijing Olympic Games were not available. But some industry sources believe the IOC may have purchased event cancellation coverage years ago in advance of the 2008 events.
Although the IOC bought event cancellation coverage for the first time in 2004, individual Olympic organizing committees have previously purchased the coverage. Organizers of the Salt Lake and Atlanta Games, for instance, purchased event cancellation insurance, according to industry sources.
Event cancellation insurance policies can provide coverage for a variety of losses, including those arising from a hurricane, severe weather, communicable disease, terrorism, boycotts, collapse of a structure and even war.
"You can buy anything for a price," Shaw says. "Event cancellation policies are pretty much all-risk," she adds. The policies typically provide coverage for the expenses incurred in organizing the event, as well as lost revenues due to the cancellation of the event, according to an industry source.
For 2008, the Beijing Organizing Committee has purchased insurance, but it was not clear whether event cancellation coverage was included. The committee purchased a liability insurance policy from the Property and Casualty Co Ltd., China's largest public nonlife insurance company, according to a report in the China Daily.
The policy, effective from Jan. 1, 2007, until the conclusion of the 2008 Paralympic Games, covers public liability, product liability, professional liability and employer's liability, in addition to liability coverage for the Paralympic Games, a separate event, scheduled to take place in Beijing from Sept. 6 to Sept. 17.
PATRICIA VOWINKEL lives in New Jersey.
July 1, 2008
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