30 June 2014 Insurance

Death and disgrace insurance on the rise

A growing number of big brands are buying death and disgrace insurance coverage through Lloyd’s to protect themselves against financial losses incurred on campaigns involving celebrity athletes, musicians, and film stars where the celebrity in question either behaves inappropriately or is unable to continue to represent the brand.

To put the scale of this industry in context, Manchester United’s Wayne Rooney reportedly earns $3 million from endorsements while Real Madrid’s Cristiano Ronaldo is reported to make around $21 million thanks to deals with Nike, Castrol and others. Although retired from professional football, David Beckham is said to earn $42 million from endorsements.

But in light of several incidents involving footballers and other celebrities where they have been dropped by their corporate sponsors because of poor behaviour, this market is apparently growing quickly.

Disgrace has become a big concern for advertisers, especially with the potential for bad news to spread quickly via the internet and social media. At the same time, costs for advertisers have been rising as the fees paid for endorsements and media expenses have been increasing.

A market briefing by Lloyd’s cites the view of a number of practitioners involved in this market. “We have seen an increasing trend of requests for death and disgrace insurance for athletes, while there is a growing appetite for the cover among Lloyd’s syndicates,” said Paul Evans, a specialist in entertainment risk management at Marsh.

“The internet has created additional risk for brands using celebrity athletes like professional footballers. What a celebrity says or does can now easily get into the public domain,” said Evans.

Alan Norris, contingency underwriter at Talbot Underwriting, has insured campaigns featuring Premiership footballers in the past. In more extreme cases, death, disability and disgrace cover has been underwritten in the market for in excess of $60 million, he notes.

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