As the diminutive Arab emirate limbers up for the huge logistical challenge that is the 2022 World Cup, Ben Dyson assesses whether this high-profile footballing event will register on global (re)insurers’ score cards
Qatar is no stranger to putting on large sporting events. It successfully staged the Asian Games in 2006, and, as Global Reinsurance was going to press, was in the process of hosting the Asian Football Confederation’s Asian Cup event.
Even so, the news in December that the Federation Internationale de Football Association (FIFA) had decided to award Qatar the 2022 World Cup raised a few eyebrows. This is not because anyone doubts that the Middle Eastern state will do a good job. It is simply that the size of the event will mean a huge overhaul of this relatively small country’s facilities and infrastructure.
To put the project in perspective, the 2006 Asian Games played host to 50,000 spectators and 20,000 athletes. The 2010 World Cup hosted by South Africa was attended by around 3m spectators, more than double Qatar’s 2009 population of 1.4m. “This will be like a life changing experience for Qatar,” says a broker source.
According to FIFA’s assessment of Qatar’s bid, the nation has projected that here will be approximately 2.9m sellable tickets, although this may be reviewed to reflect the effects of the construction schedule and modular seating.
The scale of the project, however, means plenty of opportunities for the local and global (re)insurance industry. The required construction work alone is likely to require large and complex policies.
Qatar’s bid envisages spending $3bn on 12 stadiums in total. Three of which would be renovated existing stadiums while the remaining nine would be built from scratch. The new stadiums will be built between 2011 and 2021, while the renovations will take place between 2012 and 2020. An interesting feature is that after the event, modular sections of the stadiums will be reused to construct 22 new stadiums in developing countries.
However, the stadiums are just the tip of the construction iceberg. FIFA’s evaluation of Qatar’s bid to host the World Cup contains details of an extensive development programme spanning property, infrastructure, transport and telecommunications.
For example, Qatar offered FIFA two options for accommodation and training facilities: either a traditional World Cup set-up with venue-specific team hotels and training facilities, or a ‘team base camp’ concept.
The proposed facilities for the more traditional option have been contracted but not yet constructed. If FIFA plumps for the team base camp approach, 54 of the 64 proposed accommodation solutions do not yet exist.
And that is just the team accommodation. For the spectators, Qatar is planning to more than double the number of hotel rooms available, adding 55,530 rooms to its existing inventory of 45,000 across the seven host cities. Of the total 240 properties proposed for accommodation in Qatar’s bid, only 100 exist, and so 140 new ones need to be built.
Other considerations include a venue to host events related to the World Cup competition. Qatar has proposed the Doha Convention Centre for this purpose, which is still under construction and due to be completed in 2017.
There are also construction projects underway that, while not directly related to the World Cup, will be required to be in place for the event. One big consideration is transport.
Because of Qatar’s small size - the seven host cities are within a 60 kilometre radius - transport is perhaps not as big an issue as it could have been. Nonetheless, there will be significant development of Qatar’s transport infrastructure. The company adopted a transport master plan in 2006.
A key part of the plan is the introduction of passenger metro and rail systems, covering the Qatar itself but also possibly extending to neighbouring Gulf states. This has an estimated budget of $24bn. The Qatari government has committed to spend $20bn on expanding its road system over the next five years. It is also building a new airport to replace the existing Doha International Airport at a cost of $13bn.
While potentially large, there is a possibility that premium for the construction risks alone might not be quite enough to whet the global (re)insurance market’s appetite. Construction budgets are likely to be tight, and so the premium on offer might be squeezed in a bid to get the maximum value. “It will be a significant construction and insurance opportunity, there is no question about that,” says the broker. “However, one can expect such a high profile account to be cut back on.”
The protection required while the event is running, including terrorism, might pique more interest from the global (re)insurance community, the broker suggests.
According to FIFA’s evaluation of Qatar’s bid, the country expects insurance spend relating to the hosting of the World Cup to be $8.8m. This spend includes $200m of cover for postponement or relocation of the tournament, matches or match locations.
But if FIFA’s spend on the recent event in South Africa is anything to go by, the total spend will be many times that amount. FIFA reportedly spent £6.2bn ($9.8bn) in coverage in South Africa. This includes £3.2bn for stadiums, plus a further £3bn for other businesses.
There is also the possibility that the capital markets could play a role in covering Qatar’s world cup risks. FIFA has been known to employ insurance-linked securities to cover certain World Cup-related risks. The association issued a $260m catastrophe bond to cover the risk of the 2002 world cup being cancelled, and followed this up with a similar structure to cover the 2006 event.
While hosting the World Cup will no doubt be a challenge for Qatar, it is likely to rise to it. As the broker says: “I have absolutely no doubt in my mind that Qatar will spend the required amount of money and achieve its target.” GR
Hosted by the Qatar Financial Centre Authority, in assocation with Global Reinsurance, the fifth annual MultaQa conference takes place on 14-15 March in Doha, Qatar. The event will be attended by over 250 international senior (re)insurance executives, and will examine the prospects and challenges of growth, competition and regulation in the GCC (re)insurance market. Attendance at the event is by invitation only. For more information, go to globalreinsurance.com/qatar.