‘A financial nightmare’: LA wildfires pose a grave threat to 2028 Olympics ...Middle East

The 2028 Olympics is in danger of turning into an “uninsurable mega-event” after a week of devastating wildfires destroyed large parts of Los Angeles.

The disaster has claimed the lives of 10 people so far and it’s estimated 10,000 homes and buildings have been destroyed, resulting in potential rebuild costs that could reach $135bn (£110.3bn).

Olympic organisers now face a number of uncomfortable questions over insuring one of world sport’s showpiece events, when it is hosted by LA in three years’ time.

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And one leading sports finance expert has warned that the rapid pace of climate change could result in the risks being even higher by 2028.

“The situation is clearly grave and, given the prospect of significant climate change, you do have to wonder whether the current situation might be repeated, possibly even during the Games,” said Simon Chadwick, professor of sport and geopolitical economy at Skema Business School.

“This raises very serious questions, not least about insurance, and whether Los Angeles’ big-ticket 2028 attraction might be about to become an uninsurable mega-event.”

The IOC and Olympic organising committees could do without another difficult Games following the impact of the Covid pandemic and the postponement by a year of the Tokyo Olympics in 2020.

The Japanese Games cost insurance companies in the United States as much as $2bn while spiralling costs led to the Paris 2024 Organising Committee for the Olympic and Paralympic Games (OCOG) failing to obtain cancellation cover for last year’s event.

The cost of cancellation insurance for the Tokyo Games, which totalled $17m (£13.9m), was 18 per cent higher than the figure paid by the IOC for the same cover in Rio de Janeiro in 2016.

The fees paid in the Covid-hit Olympic cycle between 2017 and 2021, meanwhile, were 35 per cent higher than those recorded over the previous four-year period.

According to one industry insider, those figures were set to “sky-rocket” before this week as a result of global uncertainty.

Now as a result of the wildfires, he says, they’re likely to be “off the charts”.

“Insurance companies would have traditionally been worried about the weather, access to the facilities and terrorism,” he told The i Paper.

“Now climate change and unpredictable weather patterns are at the absolute top of that list.

“The number of insurance companies willing to foot the bill for that risk are dwindling and those willing to do it will be charging huge amounts.

“The majority won’t view the risk as one worth taking.”

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This is already very much in evidence on the west coast of the US.

A report issued by JP Morgan on Wednesday claimed that the insured losses resulting from the Palisades fire alone were likely to hit $10bn.

Some of the biggest US insurers, including State Farm, AIG and Allstate have already stopped writing homeowner policies in California as a result of the threat of wildfires.

“Organising committees will have factored these events into their planning but you’re very much working on a contingency basis – how much do you reasonably budget for this and how cautious or not cautious are you going to be?” said Dan Plumley, sports finance expert at Sheffield Hallam University.

“How much risk they want to build in, we’ll have to wait and see but these fires will have acted as an enormous wake-up call.”

As Los Angeles takes stock, there will doubtless be those who question whether hosting the 2028 Games is any kind of priority following the events of the past week.

“The infrastructure challenges now facing the city are immense – it will be a race to get ready for staging the Games and a financial nightmare dealing with everything that needs building or rebuilding,” Chadwick says.

“Whether the city and the United States government has the stomach for what’s needed remains to be seen.”

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