Insurers would be forced to pay a large claims bill if the 2024 Summer Olympic Games in Paris were interrupted.

The Paris Games, which hold their opening ceremony July 26 and run through Aug. 11, are taking place at a time of heightened risk, with political tensions globally and locally providing fuel for disruptive events ranging from terrorist attacks to mass protests. The insurance market is heavily involved in insuring the Games, and most of the industry will have some exposure.

Everyone involved in the Games, from the International Olympic Committee (IOC) to local organizers and hotels, will have bought cover for lost earnings if the event is canceled. The amount of money that could be lost would be a "a very, very big number," Peter Shellard, contingency underwriter at insurance broker Miller Insurance Services LLP, said in an interview.

The Olympic Games would carry "one of the largest" event cancellation policies in the world, if not the largest, according to Shellard.

But it would take a serious incident, such as the whole of Paris being locked down for the duration of the Games, to cause a big problem for the industry. Given the duration of the Games and the varying locations of the events, "the chance of one small, isolated incident causing major disruption is minimal," Shellard said.

Big money

Event cancellation is not the only source of insurance claims from large events, but it is "perhaps the largest and most challenging risk" for the insurance market, according to a report about the Paris Games by Allianz SE.

"Alongside the cancellation, the liability and the property are probably the top three," said Edel Ryan, head of strategic business development at insurance broker Marsh LLC's sports, entertainment and media practice.

Insurers could have faced claims of $2 billion to $3 billion if the 2020 Summer Olympics in Tokyo had been canceled because of the COVID-19 pandemic, Reuters reported at the time. While the Games were postponed, they did go ahead in 2021, sparing the industry from paying out in full.

The bill for the Paris Olympics could be higher. Overall, sums insured for the 2024 Olympic and Paralympic Games "are expected to be among the highest value yet," because of the size, commercial value and Paris location as well as an increasingly global audience and persistent inflation, Jan Prechtl, Allianz Commercial's regional head of entertainment insurance, said in Allianz's report. Values covered by cancellation insurance for major international sporting events in general can "easily" run into the hundreds of millions of euros, Prechtl said in the report.

As the Games' official insurance partner, Allianz is involved at a "broad scale" in insuring the Games, but an event of this size requires participation from many insurers, the report said.

The IOC buys $800 million of event cancellation coverage for the Summer Games, according to Reuters. The IOC has a policy "that would come into effect under certain unexpected events ... to allow IOC to cover part of its operational cost," the committee said in a statement to Market Intelligence. The IOC said it could not disclose contract terms because of confidentiality agreements with its service providers.

Terrorist attacks are high on the list of worries for this year's Games. In May, French authorities charged a man with plotting to attack spectators attending soccer games on behalf of Islamic State, and in July arrested an alleged neo-Nazi sympathizer for planning attacks on the Games. Paris' chief of police, Laurent Nuñez, reportedly told a press conference in June that Islamist terrorism was his force's main concern.

The continuing Russia-Ukraine and Israel-Hamas wars could be fuel for disruptive incidents such as terrorist attacks and protests as well.

"There's a perceivable risk of a pro-Palestinian attack because Israel are competing in the Olympics," Imogen Mitchell-Webb, head of sports at law firm Horwich Farrelly, said in an interview. She said there could also be anti-Russia protests because while Russia is not officially competing in the Games, participants from the country are allowed to take part as individual neutral athletes.

Political turmoil in France itself, after a snap election in early July failed to deliver any party a majority, could also be a trigger for protests.

Cyberattacks also feature prominently on the list of concerns as the greater sophistication of tools available to perpetrators, growing use of technology at events, increasing triggers and the amount of attention paid to the games Games coincide. The Olympics has its own broadcasting network, for example, which would be "a prime target for hackers to disrupt it ... either to make a point, or to charge a ransom," Mitchell-Webb said.

Heavy security

French authorities seem to be taking no chances on security. Up to 75,000 police, soldiers and hired guards will be on patrol in Paris at any one time, the BBC reported July 24, calling it "the largest peacetime deployment of security forces in French history."

Something on the scale of the November 2015 terrorist attacks in Paris, where several locations, including the Stade de France, were hit by suicide bombings and mass shootings, would have to take place before the authorities would consider canceling events.

"That sort of attack is unlikely to succeed because of everything that the French authorities have got in place," George Dyson, senior analyst at risk consultancy Control Risks said in an interview.

Authorities may struggle to foil spontaneous terrorist attacks by lone individuals, but the impact is limited, and "because of the strong security forces presence, they will probably get shut down quite quickly," Dyson said.

If the Games were to be called off, the relatively small event cancellation insurance market is in better shape to cope with claims than it was at the time of the Tokyo Games. The market was hit hard by the pandemic but is "in a state of equilibrium now," Shellard said. "Generally, it's returned to a profit for underwriters."

Having survived the COVID-19 period, with estimated claims of between $6 billion and $8 billion, Ryan said the event cancellation market "has proven its resilience, and not that long ago."