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Formula One presents ever-changing risks


Formula One presents ever-changing risks The 2013 Formula One season started in Australia on 17 March and will end in Brazil on 24 November.   In a bid to win new audiences, the sport has introduced new venues (in India and the USA), street circuits and night races and there are plans to add races in New York and Moscow next year.

However, with international expansion come new risks.

Political risk

Natural catastrophes and political violence are just two types of risks to consider as less traditional countries are added to the FI circuit. 

Chris Rackliffe, contingency underwriter at Beazley says, "The Arab Spring and the cancellation of the Bahrain Grand Prix in 2011 highlighted the risk of political violence for event organisers.  It also demonstrated why it is important to buy cover as far in advance as possible, because insurance is likely to be limited or too expensive once an event has happened."

Safety

New circuits incorporate the latest safety features in their design, says Tim Butcher, Portfolio Manager at QBE, which insures 12 out of 20 of the Formula One races.

Despite better safety, the first race on a new circuit carries the greatest risk, explains Butcher.  "Something could have been missed and race organisers and marshals will not have the benefit of experience.  There will also not be the comfort of a prior-year risk assessment, required by the sports regulator, the FIA, after each race."

Weather can also pose a safety risk for insurers, especially tropical downpours with the increased number of races in Asia.

However, the possibility that one or more cars could leave the track at speed into the crowd is the highest risk from and underwriter's perspective, "My biggest fear is when a series of events come together and cause a catastrophic disaster - the sport is now much safer, but you just can't predict these types of accidents" says Butcher.

Cancellation

The changes in Formula One mean that the organisers of new races are starting to see the value of cancellation insurance.

Again, the weather can dramatically contribute towards this. "One particular risk of a night race is how rain could affect the visibility of the drivers in a floodlit race, and what effect this could have on the safety of the race" says Rackliffe.

The drivers

Almost all Formula One drivers buy personal accident insurance to cover the risk of lost bonuses, salary and sponsorship monies should an accident temporarily or permanently end their careers.

Limits can be high, as much as five times an annual salary; in Formula One that can mean and excess of £10m.

Sebastian Vettell, the youngest triple champion in the history of the sport, won the 2012 F1 World Championship.  He is well known for his victory routine in which he points his index finger in the 'number 1' position and has since had his finger insured for a hefty $10m (click here to read more).

In addition to Beazley and QBE's involvement with Formula One racing, leading insurer Allianz has been a "global partner of Formula One" since 2007. Click here to find out more about how the partnership works.
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