Lobbyists: No Money , No Super Bowl

200px-Super_Bowl_logo.svgThe last ten years have been a windfall for insurance companies: first with the post-9-11 legislation and then Obamacare. Now however, lobbyists are threatening to cancel the Super Bowl unless Congress renews the TRIA—the Terrorism Risk Insurance Act to cover insurers so that they will not have to actually pay out for any costs associated with terrorism. There may be good reasons for the bill coverage but there are also some unanswered questions. Do not expect too many answers however.

TRIA was enacted in 2002 the 9/11 terrorist attacks. The insurance companies secured a promise to cover costs for insurance policies that payments related to terrorism. It was renewed in 2005 and in 2007, but was set to expire on December 31st. With the 9-11 attacks over a decade old, some have argued for a return to market control and an end of the subsidy. However, the lobbyists have an ace in the hole. They have the Super Bowl. It does not matter that a few years ago, FIFA was able to work out a special financial arrangement with insurers to hold the World Cup.

With both the insurance industry and the NFL joined, this could be over before it starts. The NFL has proven the champion at acquiring special deals from both the government and private companies. The “non-for-profit” NFL is aiming at a goal of $25 billion in annual revenues. The NFL has organized with 80 business groups nationwide to form the Coalition to Insure Against Terrorism (CIAT) to urge Congress to fund reauthorization of the TRIA legislation. With only the public’s tax money on the other side, there is not likely to be much of a debate. However, the bill will obligate the public to a wide array of businesses for any costs associated with terrorism. The bill obligates us to cover a portion of insured losses above $27.5 billion, up to $100 billion.

Insurers are saying that unless Congress renews the legislation, they have a right to cancel terrorism insurance policies after Jan. 1 . . . including the one covering the Super Bowl.

Now, I admit that the fact that the Bears are not playing in the Super Bowl creates a slight conflict. However, shouldn’t there be something akin to a debate over an obligation for as much as $100 billion? I am not sure that this risk should not be handled in the market. After all, insurance is based on mathematical or actuarial models of probabilities for payout. It is considered an efficient system for valuing risk. I am not sure why this system is not sufficient. Of course, the Congress could always bailout industry on a case-by-case basis as they have in the past. The interesting dimension of this issue is that the public has generally opposed bailout but this legislation is structured in a less obvious way as simply as “cost-sharing” provision. The industry may be able to prevail on the merits but this is an industry that is supposed to be based on the prediction of risk. Nevertheless, war insurance coverage has precedent in our system and other countries.

I am not sure of the merits of this issue but I would sure like to explore them rather than dealing with a demand with a proverbial gun at the head of the Super Bowl. That seems a bit too much like . . . well . . . terrorism.

Business Week has strongly called for passage.

58 thoughts on “Lobbyists: No Money , No Super Bowl”

  1. Here’s an idea nobody seems to have considered: Make two (or more) classes of tickets, one for which no insurance is offered against terrorism and in which the purchaser specifically waives any potential claims against the NFL, the stadium owners, the insurance companies, and so on; and one which offers coverage against terrorism, perhaps with price options for varying levels of protection or different types of injuries, with a waiver of claims for anything else beyond what is stated to be covered. Each class of ticket could then be priced according to how much protection is provided, based upon what the insurance companies estimate their risk would be. The insurance companies would then take out policies that would protect themselves in case of a large loss (which is already a standard procedure in the industry and it is performed by huge funds created for just such a purpose – I’ve forgotten what this is called). No one would be required to buy tickets with protection (except for maybe enough to have their carcasses hauled off to the morgue, but that might already be included in the stadium’s liability insurance), and those who bought terrorist protection would feel safe and secure. No insurance company would be at risk and the government, and the taxpayers who ultimately fund the government’s activities, would not have to pay for something that only a percentage of the population will enjoy and which financially benefits a small group of very rich people who own and profit from it. (I know, the local economy of a city where the Super Bowl is held benefits from it, too, but that still is no reason the whole country should be required to finance it in any way.) Or, is this concept too libertarian for most of the folks here?

  2. Chip. If you post the link I’ll have a look at it and send it to Professor Turley for consideration.

    One way you can work this is to use an editor like Microsoft Word to type your text in, proofread, and then paste it into the reply box here. Some web browsers have auto spell correct built into them when entering information into text boxes.

    He likes the site to be simple to use and not wanting to have to babysit a technical matter or plug in that goes south but we’ll have a look.

  3. This is all a big bunch of malarky that was most likely ginned up by some football hating morons. Part of the attempts to attack and destroy the NFL.

    The Super Bowl will be played no matter what.

    There is a better chance that they will cancel the next Presidential election.

    With Obama there is definite possibility that would happen.

  4. Hey Darren, since you’re here, an admin question: How do you feel about adding a “preview comment” plugin? It’s nice to be able to edit comments before posting them.

    I can provide a link to one for wordpress if you’d like.

  5. ChipS, Watched one of my favorite actors, Bruce Dern, in Nebraska a couple weeks ago. Great performance.

  6. The Super Bowl has evolved into this countries secular holiday. Madison Ave. and Wall St. would NEVER allow it to be cancelled

  7. BFM, I have liked you from my first encounter w/ you. I wish you spent more time here. I know many new folks don’t have the same sensibilities as you, but you are one of the most intellectually honest people I encountered when I arrived here. And, I too would be honored to buy you an adult beverage should we ever meet.

  8. That’s just a silly shakedown. Anyone truly think with the amount of money that changes hands that the super bowl would actually be cancelled? They may end up trying to require people to attend naked, but they won’t cancel it. The sad thing will be when some bonehead representative stands up for the NFL in this case, and I would imagine we’ll be hearing about that any day now…

    1. “Anyone truly think with the amount of money that changes hands that the super bowl would actually be cancelled?”

      I will bet every important contract for the SB was in place months ago.

      The only way this SB gets cancelled is if it comes down on stone tablets.

  9. For chrissake BFM, I DON’T! WTF makes you think I do?? I AGREE W/ YOU that insurance companies can exclude war w/o govt. assistance. I said insurance companies are soulless because they want it both ways. They don’t want govt. controls, but they LOVE govt. protection. An exclusion in an individual insurance policy does not preclude litigation. Insurance companies, like all big companies, LOVE protection from litigation. We are much too litigious a nation but blanket protection from judicial remedies are dangerous. Are we cool now, my brother??

    1. ” They don’t want govt. controls, but they LOVE govt. protection… Are we cool now, my brother??”

      Heads they win, tails we loose.

      You are my role model, Nick. We don’t always agree, but if we ever wind up in the same bar, I’m buyin’.

  10. @ Chip
    I do know that banks in the US have been allowed to pool participate in loans that exceed their individual FDIC requirements. Participation Loans which spread the risk over multiple institutions.

    http://en.wikipedia.org/wiki/Participation_loan

    So I do believe that the insurance companies can do the same.

    http://www.wisegeek.com/what-is-an-insurance-pool.htm

    This is what SHOULD have been done to cover the high risk health insurance pool instead of ruining every one else’s insurance.

  11. DBQ–Are insurance companies in the US allowed to jointly issue policies? I think they are in the UK.

    I ask b/c something like the loss from a major attack on the Super Bowl isn’t diversifiable, so any one insurer would be taking a pretty big gamble by issuing coverage. If a consortium of insurers were allowed to underwrite such a policy, it would seem to be much more feasible. So I’m guessing that there might be an antitrust clause or something that prevents this from happening, but I don’t really know.

  12. BFM, I would hope by now you would know this libertarians answer to your question!! I am a free enterprise man to my core.

  13. @ BFM

    I think you misunderstood Nick. The insurance companies should be allowed to conduct their business in a market based manner. The government should butt out. Fat chance on that, though. Cover or not cover instances. Leave it up the individual companies. People will then buy the insurance that covers what they need and excludes those things that they/the consumer do not consider a risk to themselves. If an insurance company guesses wrong and has to cover more than they anticipated and goes out of business…..too bad……free market. If a person buys less than they ultimately need. …..too bad…..free market. You made a bad bet.

    This is the free market exchange that Obamacare violates. It forces ALL medical insurance to cover things that many consumers don’t need or want. We are forced to pay for coverage that forces the cost of insurance up. For instance. Policies are required to cover pediatric dentistry and maternity care. SO……as an older woman…..do you think I need to pay for these events? Hardly. Yet…I have to buy that policy or pay a fine. Where is the free market here????

    Because policies are not allowed to differentiate….one size fits all…..the cost of insurance is going through the roof. Economics 101. Gruber is correct.

    1. “I would hope by now you would know this libertarians answer to your question!! I am a free enterprise man to my core.”

      I don’t see how a libertarian or free enterprise man could possibly support the government protecting the insurance companies and their profits for an entertainment project.

      I do see the argument for government intervention for projects that relate to the national interest. For example, I don’t agree, but I see the argument for government intervention for insurance of nuclear power plants. Without government intervention the plants might never be built. If you think that power is essential then you might support government stepping in.

      I don’t agree, but I see how others might argue for government intervention for energy projects.

      But where is the national interest for an entertainment project like the superbowl? If the companies see a chance to make some money then let them risk their money. But if it looks like a looser let them put their money somewhere else.

      That is the wonderful thing about the market. You put your money down and take your choice.

  14. BFM, There are some regulation on insurance companies on what can and cannot be excluded. You may have heard of Obamacare??

    1. ” You may have heard of Obamacare??”

      Do you know of any regulation that requires insurance companies to cover acts of war or terrorism in the case of an entertainment project?

      So are you advocating ObamaNFLcare?

      Or are you willing to let the Insurance companies and the NFL make their business decisions without government interference?

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