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The untapped opportunity of sports insurance in Nigeria

By Ifeanyi Ugwuadu

Many will recall the national tragedy several years ago when one of Nigeria’s brilliant midfielders, Sam Okwaraji slumped and died during a live match at the national stadium in Lagos. At the same world cup qualifier, seven fans reportedly choked to death due to overcrowding. Earlier in 1979, 24 fans reportedly died during a stampede at a semi-final FA cup encounter in Lagos. The just concluded National Sports Festival, Asaba 2022, recorded the death of an athlete, Chukwuemeka Igboanugo who died in the boxing ring. 

Tragedies such as these are certain risks which ought to be insured and victims and their families compensated. Arenas such as national stadiums and other small venues for sporting activities ought to be covered against the potential danger of accidents that have been recorded at various venues in the country.

The world’s sports insurance business is projected to reach $600bn in the next three years. By 2025, global insurance underwriters is expected to generate this much revenue from sports-related risks transferred to the industry.  Statista’s revenue estimate for Nigeria in the sports & outdoor segment is estimated to reach US$112.20m in 2022.  At a cumulative annual growth rate of 7.45% over the next 5 years, revenue will hit a volume of US$160.70m by 2027. 

Most of this revenue would come from sports and outdoor items like clothing, and shoes, as well as sports and outdoor equipment (fitness equipment), and swimming accessories.  Track and jogging suits worn for sporting activities, lifestyle apparel by sportswear brands, footwear for sports purposes, athletic apparel and footwear worn for leisure.

Revenues from sports underwriting accrue from mostly exposure to third-party liability and accident risks to which professional sports people are exposed. Sporting venues, professional leagues, event organisers, and clubs are exposed to additional risks, including physical damage to infrastructure and equipment, general liability, directors’ and officers’ liability, business interruption, and event cancellation.” Disability and accident insurance is a key risk management tool for professional athletes and teams that can face considerable earning losses in case of injuries.

These activities when fully insured by club owners, academies, schools’ inter-house sports, universities and Polytechnic games can really deepen the role of sports in harnessing youth development in the country. In this article, we will explore the wider scope of how insurance can contribute to deepening sports development in the country.

Sports Policy

Only last month, the Federal Executive Council (FEC) approved Nigeria’s first ‘sports as a business policy’, National Sports Industry Policy (NSIP). The Sports Ministry leadership sees this as the “birth of a business model that will attract private investment through government incentives underpinned by a new sports code of governance for sporting federations.” This policy document is essentially the counterpart to Sports Nigeria, an initiative of the Nigerian Economic Summit Group (NESG) and stakeholders in the country’s sports industry which is aimed at charting a “business-oriented pathway for sports development in Nigeria.

According to promoters of Sports Nigeria, the objective of the private sector-led program is to aggregate the quantum of investment required to harness and deploy “investment and private sector funds across the value chain by implementing strategies for developing sports as a platform for economic, social, physical and youth development. 

At the official launch of Sports Nigeria, the sponsors described it as “a private sector-led intervention agency established to foster the development of the sports industry in Nigeria.” What this implies is that Nigeria never had a national sports policy to drive the development of the various aspects of commercial physical activity and may have relied for decades on the questionable framework –– a case-by-case basis, to drive sports activities in the country. Sad as this may appear, it provides all stakeholders with an equal opportunity to develop sports.

Football presents Nigeria with the best possible pathway towards developing the sports industry. Financial models already show that teams that have the best collective insurable value tend to outperform others, particularly the national teams. However, the potential for growth of individual athletes in various other sports depends on the worth of the financial value and this can be the basis for the underwriting of the insurance needs of our national teams and local clubs. The result would be a growing confidence among youths who may wish to engage in professional sports at home. The practice sport creates risks and only some of those risks can be covered by regular insurance policies. However, “insurance needs of professional players and teams are highly sophisticated and require specialised coverages that are mostly provided by the Lloyd’s of London market as well as by a limited number of property and casualty insurance companies.

Organic Growth Prospects

To achieve organic growth, the national sports policy should as a matter of inclusiveness and further boosting of the development of government and the private sector policy in this regard, integrate specialized insurance for sports in the country. This type of insurance covers aspects of risks outside the general accident and injury policy.

A report by DBRS Morning Star, the World’s fourth largest credit ratings agency and market in Canada, the United States and much of Europe forecasts an exponential growth in revenue reaching up to US$600 billion in 2025. “The global expansion of the professional sports industry combined with the varying type of its insurance needs has resulted in the exponential growth of the sports insurance business in the past few years”, It stated.

Insurance powerhouse, Lloyd’s alone generated premiums of over £150 million in a sports-related accident and health insurance. 

Lloyd’s syndicates have developed detailed models to calculate the insurable values of national teams. Based on this, they have used this to successfully predict the outcome of the last two FIFA World Cups except for the current World Cup, which placed England ahead of the other teams. 

Notwithstanding, the core logic for the model which predicts the best performance for national teams based on their “higher collective insurable values” supports various reward models. England with the insurable value of £3.17 billion has the highest estimated insurable value. The second and third national teams with the highest insurance values in the tournament are France, with £2.66 billion and Brazil, with £2.56 billion, respectively. Brazil and England have already exited the tournament.

Sport Development Framework

Only a few months ago, Nigerians celebrated Tobi Amusan, the athlete that conquered the athletic world. Imagine a Tobi Amusa declaring that she was insured by a local insurer for her professional engagements. The awareness of insurance that would have heralded such pronouncement will be unequalled in its effect on the national sporting psyche. Sports has proved to be the most unifying of all activities in all parts of the world, especially in international championships where only a select few are called up to represent the nation. Insurance is an asset that can be deployed to raise the value of sports activities.

For grassroots development of special and general insurance, the best place to start (and I do hope the Sports Nigeria and National Sports Industry Policy took this into consideration) is the Local Government Area where respective sports are most popularly played. Indeed all levels of sporting require the insurance component to cover ordinary risks of injury and disability including supplementary life income if the disability is so severe as to threaten a career or prevent the optimal performance of an athlete. 

Other enumerated areas where genuine data can be generated for underwriting considerations include; sports clubs in Nigeria, primary schools, and secondary, and tertiary schools where respective sports are popular. Derivable from this exercise will be the percentage level of development of the respective sporting activity and an offer of insurance protection. Another level of data needed will be the number of coaches available and required for each sporting activity.

Asaba 2022 just ended apparently without government-backed insurance for all participating athletes. Even if there were a global cover for all participants, the competition would have provided an opportunity to demonstrate the protection insurance provides for the enhancement of this activity.  In particular, the attention would be drawn to compensation paid to the family of the boxer, Chukwuemeka Igboanugo who died on active duty. Attendance at national competitions, the number of LGA and States competitions organized would have given a general idea about the scope and the required numbers to grow the sport. Insurance can be a motivational instrument for an athlete to commit to his best quality with an assurance that whatever happens to him, his needs and welfare have been factored into a benefits scheme that includes insurance.

Maturing sports industry in Nigeria would require professional clubs to buy disability insurance for key players to protect themselves financially as they may be “obligated to continue paying an injured player’s salary under a guaranteed contract”. Event sponsors can also buy disability insurance for certain athletes to protect athletes.

The Covid-19 pandemic and the resulting squeeze on sports and other entertainment events would have tasked clubs if they had to pay athletes throughout the period. Business interruption such as event cancellation insurance protects the insured party against the loss of income that a business suffers as a result of a covered peril that triggers a suspension of its activity.

Many cases throughout history have provided valuable insights for sports organisations looking to mitigate losses resulting from event cancellations. Moreover, the insurance industry provides the expertise and capital required to provide sizable coverages for professional stadiums and arenas.

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