BOSTON2024:RISKMANAGEMENTANDINSURANCEOVERVIEW

Introduction

UnderanupdatedplanannouncedonJune29,2015bytheBoston2024Partnership(referredtoasBid2.0),theOlympicandParalympic
Gameswouldacceleratetransportationimprovements,createjobs,andproducethousandsofnewunitsofhousingforGreaterBostonwhile
producingasurplusandminimizingriskstotaxpayers.Whilenoprojectisevercompletelywithoutrisk,Boston2024sfactbasedanalysis
demonstratesthattheGamesrepresentahistoriceconomicdevelopmentopportunityforNewEnglandthatwemaynotseeagain.

HostingtheOlympicandParalympicGameswouldbeagreatprivilege.Hostingalsocomeswithitsshareofrisks,asanybigopportunitydoes.
However,historyhasproventhatfiscallyresponsibleapproachestorunningmajoreventoperations,liketheOlympicandParalympicGames,
arecapableofgeneratingoperatingsurplusesand,moreimportantly,createlongtermbenefitsthatadvanceacityseconomicprogressfor
yearstocome.

AhistoricprerequisiteofhostingtheOlympicandParalympicGamesisthatthehostcity,togetherwiththeorganizingcommitteeand,toa
morelimitedextent,thenationalOlympiccommittee(theUnitedStatesOlympicCommitteeinthecaseoftheUnitedStates),mustprovide
guaranteestodelivertheOlympicandParalympicGames.Inordertopreventsuchguaranteesfrombeingdrawnuponandtoinsteadfullyfund
theOlympicandParalympicGamesandtheirpreparationsolelyfromthebudgetedfunds,Boston2024hasdevelopedadetailedoverallrisk
managementstrategyasoutlinedinBid2.0.

Theriskmanagementstrategyincludesfourlevelsofprotectiontoavoiddrawingonrequiredguarantees,eachofwhichbuildsupontheprior
levelandmultipliestaxpayerprotection.

1.Aconservativeandtestedoperatingbudgetresultinginacontingencyandsurplus
Boston2024employedarigorousandconservativebudgetexerciseandadheredtoasetofguidingprinciplesincludingmaximizing
opportunitiesforlegacyvalue,creativelyandresourcefullyutilizingBostonsexistingassets,showcasingourcitysvibrantsportscommunity
andculture,andbeingresponsibleandtransparentinestimatesandprojections.Consequently,boththeoperatingbudgetfortheOlympicand

ParalympicGamesandthecapitalbudgetincludeconservativeestimatesforexpensesandbuiltincontingencies,resultinginadditional
opportunitiesforcostimprovements.Theoperatingbudgetalsoincludesconservativeestimatesforrevenues,basedonrevisedguidancefrom
theInternationalOlympicCommitteeandUSOC.Muchoftherevenueisknowableandobligatedtobepaidunderexistingglobalanddomestic
sponsorshipandbroadcastagreements.Estimatesfortheremainingrevenues(e.g.,OlympicandParalympicGamesticketing,licensing,and
otheropportunities)arebasedonpastexperience,newguidancefromIOCOlympicAgenda2020reforms,andconservativeassumptionswith
substantialroomforupside.Finally,thebudgetsdemonstratediversificationofthecostbaseinto30plusvenueswhichdispersesriskofcost
overrunsandvenuedelivery.

2.Transferofrisktoprivatesectorincapitalprojectdevelopment
Consistentwithourbudgetingdevelopmentprocess,Boston2024willdriveaprudentandfiscallyresponsibleapproachthateffectively
managesdevelopmentscopeforbothlargescalecapitalandvenuerelatedprojects.AnimportantdistinctionisthattheIOCdoesnotcontrol
scopenordoesitaskforadditionalmodificationsafterthefinalhostcityselection.TheOrganizingCommitteeisboundtoprovidethefieldof
playandlocations,perthebidsubmission.ThusastheGamesOrganizingCommitteemanagesandcontrolsprojectscope,anyincreasesor
decreasesinrequirementsareattheCommitteesdiscretion.Inadditiontodiligentscopemanagement,Boston2024willalsodriveathorough
constructionprocurementprocesstoensuretheselectionofdevelopers,contractors,andsubcontractorsthathavesolidfinancialbackingand,
inthecaseofeveryvenuecontract,deployimportantcontractingtechniques(e.g.guaranteedmaximumprice).Developersandcontractors
willalsoberequiredtopurchaseadditionalprotections,includingsuretyandperformancebondsonallprojects.Onlargescaleprojects(like
WidettCircleandColumbiaPoint),totheextentnecessarytoprovidefurtherfinancialcertaintyorfillgapsinsureties,ifany,capital
replacementinsurancewillalsoberequired.Asaresult,approximately85%oftotalconstructioncostsaresegregatedandcoveredseparately
bybothprivatedeveloperandumbrellainsurance.Theremaining15%,concentratedinvenuerelatedcosts,areprojectsthataresmallerin
scaleandscopethatwillhavedeveloperbackedinsuranceandbefundedfromoperatingbudgetrevenue.

3.Establishedmegaeventinsuranceaddressingoperatingbudgetrisks
Boston2024willpurchaseawiderangeoftraditionalinsuranceaddressingaspanofrisksduringpreparationforandoperationoftheOlympic
andParalympicGames.Insurancepolicieswillalsoprotectandhelpinsurethereceiptofrevenuesfromsponsorsandothersources.

4.Overarchingexcessinsurancecoverageandadditionalprotections
Asafourthlayerofprotection,Boston2024willpurchaseadditionalreadilyavailableinsurancecoveragestoprovideadditionalprotection
againstdecreasedrevenuesandincreasedcostsandtoprovideoverarchingexcesscoverage.

Theriskmanagementprogramisdesignedtominimizethepossibilityofcostsbeingincurredbytaxpayers.Throughthefourpillarapproach
describedabove,Boston2024expectstouseinsuranceinamorecomprehensivewaythaninanypriorOlympicandParalympicGamesin
history.

InsuranceCoverageinGamesContext

Insuranceisacommontoolusedthroughouttheworldonalldifferentkindsofprojectsandundertakings,somemuchmorecomplex,riskyand
costlythantheOlympicandParalympicGames.Insurersareexpertatanalyzingsuchrisksandassumesuchriskinreturnforreceivingthe
paymentofapremium.Manyoftheinsurancepoliciesthatwillbeusedhereentitlethepolicyholderstopaymentsifcertaineventscoveredby
thepolicytakeplacejustliketheauto,home,orlifepoliciesthatarefamiliartoeveryone.Insurancecompaniesagreetomakesuchpayments
inexchangeforpremiumspaidtothem,whichthecompaniesinturninvestinordertomakemoney.Whileallinsurersareregulatedbyvarious
governmententitiestoensurethat,shouldtheyneedto,theycanpaytheirpolicyholders,Boston2024willbespreadingitsriskthroughout
manyinsurancecompaniesinboththeUnitedStatesandabroadinordertofurtherprotectBoston2024,theCityofBoston,the
CommonwealthofMassachusettsandtaxpayers.

TheBoston2024insuranceprogramwillconsistofmanytypesofinsurancepoliciesandbondsfromanumberofdifferentinsurancecompanies
orotherfinancialinstitutionsthatspecializeinthedifferentrisksthatwillbepresentbothduringconstructionoftheprojectssupportingthe
OlympicandParalympicGamesandduringtheoperationoftheGames.Allpremiumsforsuchinsurancepoliciesandbondswillbepaidfrom
privatefunds,includingtheBoston2024operatingbudgetandprivatedevelopersandcontractorswhoworkonthevenues.

Althoughnopublicfundswillpayforinsurance,insurancecoveragewillstillextendtotheCityofBostononeverypolicyandtothe
CommonwealthofMassachusettswhereappropriate.ThismeansthatifacoveredclaimweremadeagainsttheCityofBostonorthe
CommonwealthinconnectionwiththeOlympicandParalympicGames,insurancemoneywouldbeavailabletocoverthoseclaims.Finally,if
someactionoreventpreventedoneinsuredentity(forexample,Boston2024)frommakingaclaimunderapolicyfollowinganinsurableevent,
thatwouldnotprecludeanotherinsuredentity(forexample,theCityofBoston)fromdrawingonthepolicyaftertheinsurableevent.

ConservativeOperatingBudgetwithContingencyandSurplus

Boston2024scomprehensiveandunprecedentedriskmanagementprogramisintendedtopreventtheuseofpublicfunds.Neitherthe
CommonwealthofMassachusettsnortheCityofBostonwillfundanyportionofthecostsofbuildingvenuesoroperatingtheOlympicand

ParalympicGamesor,asinthecaseofsomepasthostcities,offundingabudgetcontingency.Instead,Boston2024willfundtheOlympicand
ParalympicGamesprivatelyfromtherevenuesourcessetforthinBid2.0,includingbroadcast,sponsorships,ticketing,USOCsignature
properties(e.g.,theTorchRelay),andothersources.Boston2024splandoesrelyonCommonwealthofMassachusettsfundingforcertain
infrastructureprojectsthatwillbenefittheOlympicandParalympicGames.Someoftheseinfrastructureimprovementprojectsarealready
planned,andallofthemwouldbenefittheCommonwealthinthelongrun,regardlessoftheGames.

Themostimportantpartoftheriskmanagementstrategyistoensurecarefulbudgetingandstrongprojectmanagement.Thisisentirely
achievable:TheindividualprojectsidentifiedinBid2.0areinline,intermsofscaleandcomplexity,withotherrecentdevelopmentprojectsin
theUnitedStates,includingtheconstructionoftheBostonConventionandExhibitionCenter.

Expertshavebeenabletomakeconservativeestimatesofthecostsofthecomponentsoftheprojects,buildingtoaconservativeestimateof
overallcosts.Similardetailedplanningandexpertisebasedonpriorexperiences,bothforpriorOlympicandParalympicGamesandother
comparableevents,hasinformedtheoperatingbudget.Inaddition,contingenciesofupto15%ineachofthevenuebudgetshavebeen
includedtofurthermitigatetheriskofdecreasedrevenuesorincreasedexpenses.Managementofboththerevenuesandtheexpensesforthe
operatingbudgetwillbetheprimarylineofdefenseforriskmanagement.GiventhebudgethasbeenbuiltoffofLondonexpensesforthe
OlympicandParalympicGamesithostedwherethecostofdoingbusinessishigherthanBoston,thereissubstantialopportunityfor
improvementcomparedwiththecurrentbudget.

Inaddition,theinitialoperatingrevenueforecastisconservativeandpresentssubstantialroomforupside.Revenueforecastsweremadein
coordinationwiththeUSOCandIOC;amajorityoftheserevenuesaresponsorbasedandknownwellinadvance.Theticketingand
sponsorshiptrendsbothintheOlympicandParalympicGamesandinU.S.sportsmorebroadlymaketheforecastsintheBid2.0budgetallthe
moreconservative,mostnotably:

IOCContribution($1.5B)ComprisingTOP(TheOlympicPartners)sponsorsandbroadcastrights,thelatterofwhichhavebeen
contractedthrough2032fordomesticbroadcast.IOCstaffhasconfirmedthat2024bidcitiesmaycountonaminimumof$1.5Bfor
planningpurposes.Boston2024isunawareofanyinstancefrompreviousOlympicandParalympicGameswheretheIOCcontribution
hasbeenlessthaninitiallycommunicated.
DomesticSponsorship($1.52B):Totaldomesticsponsorshipestimatesarebasedonabottomupbuildforthedomesticmarketing
usinganestablishedOlympicandParalympicGamesmodelofsponsorshipsales.WithalongandstablehistoryofmonetizingtheUS
OlympicandParalympicTeamrightswithdozensofcommittedbluechipdomesticsponsors(e.g.,AT&T,Nike,Deloitte,BMW,Citi)

andarobustdealflowthatissupportedbytheTedStephensAmateurSportsAct,domesticsponsorshipshavetraditionallybeenthe
largestrevenuestreamforOlympicandParalympicGames.Approximatelyonethird(1/3)ofsponsorshipshavealreadybeen
contractedthrough2020.UsingconservativeestimatesbasedonpastGamesandhistoricalagreements,approximatelyonehalfof
domesticsponsorshipscouldbecontractedbytheendof2019,withtheremaining50%proportionallycontractedfrom2020untilthe
Games.Indicativeofthestronggrowthwithinthesecorporatesponsorshipagreements,Tokyohasalreadysecuredapproximately
$1.4Bfromitsdomesticsponsorshipprogram.
Ticketing($1.25B):Initialestimatesleveragestronghistoricaldemand(i.e.,lastthreeOlympicandParalympicGameshaveexceeded
ticketingprojectionssubmittedintheirrespectivebids),arobustlocalsportsmarketanddemand,andadditionalrevenuegenerating
opportunities(e.g.,moresportssuchasGolfandRugby,moreGamessessionsthatmirrorRiosscheduleratherthanLondons,and
regionalpreliminarymodel).Tobeconservative,ourcurrentestimatesalsoexcluderevenuesgeneratedfromthedeliveryofthe
ParalympicGames,buttheincrementalcostsofdeliveryofsuchGamesareincorporatedintothecurrentexpenseprojections.
Accordingly,anyrevenuesgeneratedfromtheParalympicGameswillbeanetpositivetothebudget.

BothcostandrevenueprojectionsarebasedonexpertdataanalysisandexperiencefrompriorOlympicandParalympicGames,andhavebeen
pressuretestedwithavarietyofexperts.ThebudgetisbasedondeepdivediscussionsintotheLondon2012OlympicandParalympicGames
budgetwiththechieffinancialofficeroftheLondon2012Games,multiplevisitsanddiscussionswithformerhostcities,openandcontinuous
engagementwiththeIOC,andengagementwithleadingmegaeventconsultantsandadvisors.Accounting,managementconsulting,real
estate,andconstructionexpertshaveallreviewedthebudget,andthebudgetcontinuestobeinternallyreviewedandrefinedandwillbe
reviewedwiththeMayorsOfficeofOlympicPlanningandTheBrattleGroup,theconsultantengagedbytheCommonwealthaspartofatop
tobottomreviewofBoston2024sbid.

Therisksanddriversofpotentialcostoverrunsarespreadamongstabroadrangeofvenuesandprojects.Thelikelihoodofallprojects
sufferingoverrunsislow;riskisspreadacross30plusvenues.Thatdiversifiedsetofrisksisthenaddressedbothindividuallywithprojectby
projectcontingenciesandinsurance,andalsotopdownwithanoverallcontingencyandsurplusandinnovativeoverarchinginsurancethatwill
bedetailedfurtherinthememo.

Evenwiththeconservativebudgetingdescribedabove,Boston2024sBid2.0projectsacontingencyandsurplusintheoperatingbudgetof
$210million,acontingencyof$54millionforvenueconstructionintheoperatingbudgetandapproximately$400mincontingencyfor
constructionintheWidettCircleandAthleteVillageprojects.Likeeveryotherelementoftheoperatingbudget,thelineitemforthepremiums

fortheinsurancepolicies,$128million,isconservativeandbasedonthehighendoftherangeofestimatesrecentlyreceivedfromthe
insurancemarkets.

TransferofRisktoPrivateSectoronCapitalProjects

Largecapitalprojectstransferrisktoprivatesectordevelopersthroughbothcontractingandinsurance.Oncedevelopersagreetomaster
contractswiththeCityofBostonforthetwolargestconstructionanddevelopmentprojectstheOlympicStadiumandfurtherdevelopmentat
WidettCircleandtheAthleteVillageatColumbiaPointthedeveloperswillassumeresponsibilityfortheprojects,entirelymanagingand
fundingthem.Boston2024hasvalidatedboththecostsofandconfirmedtheinterestinthetwoprojectswithdevelopers,contractors,and
realestateinvestors.

Contractingformediumtolargescaledevelopmentstransfersrisktodevelopersandhasbeendoneatamuchbroaderscalethanthe
developmentneededfortheOlympicandParalympicGames.Inadditiontoarobustriskmitigationstrategyaddressedthroughproper
contracts,performancebonds,andareasonablelevelofcontingency,everyconstructionprojectalsohasitsownsetofcontractual
arrangementsthatmayinvolvelegalobligations,deliverymethods,incentiveagreements,costlimitations,andtimingcommitments,among
otherparameters.

Itiscommonforlargescaledevelopmentprojectstoagreeuponaguaranteedmaximumprice(GMP)orlumpsumcontract.Underthis
contracttype,theengineerorcontractor(andsubcontractors)agreestoperformthespecifiedanddescribedprojectforafixedprice,withthe
contractorresponsibleforcostoverruns,unlesstheGMPhasbeenincreasedviaformalchangeorderasaresultofadditionalscopefromthe
client.Asmentionedearlier,theGamesorganizingcommitteemanagesandcontrolsprojectscope;anyincreasesordecreasesinrequirements
areattheCommitteesdiscretion.Weexpecttousethistypeofcontractforeveryvenue.Throughacompetitivebidprocess,weforeseemany
localandnationalcontractorssubmittingcompetitiveGMPproposals.Aspartoftheprocess,allcontractors,subcontractors,andmaterials
supplierswillberequiredtoprovidepaymentandperformancebonds.

Insuranceonspecificdevelopmentprojectsisthenextlayerofprotectionforthetaxpayer.Inadditiontocarefullybudgetingandmanaging
venuedevelopmentandevaluatingeverystageofconstruction,Boston2024willrequirethateachandeverydeveloperandcontractorforallof
theprojects,includingtheOlympicStadium,theAthletesVillage,theaquaticscenter,thevelodrome,andallothervenues,isappropriately
insured(andtheCityandtheCommonwealthareprotected)fromthemomenttheyseektobidonanyGamesrelatedprojects.

Thedetailedrequirementswillbesetforthinthespecificationsapplicabletoanydeveloperandcontractorthatbidsonanyvenueorother
projectfortheOlympicandParalympicGames.Thecontractorswillhavetoacquiresuchinsurance(andwillhavetorequirealloftheir
subcontractorstoalsoacquiresuchinsurance)asaconditionofbeingawardedthebidandwillhavetoincludethecostofinsuranceintheir
projectbudget.Thisisacommonpracticeinbothpublicandprivateconstructionprojects.Theconservativeestimatesofthebudgetsforthe
venuesinBid2.0includeestimatedcostsofinsurance.

Anothertypeofriskprotectionthatwillbeusedintheconstructionphaseisknownassuretybonding.Whilethetermmaynotbewidely
known,thepurchaseofasuretybondisastandardpartofallmajorconstructionprojects.Suretybondsareissuedbyinsurancecompaniesas
wellasotherfinancialinstitutions.Asuretybondguaranteesthataprojectwillbefinishedincasethecontractordefaultsthesuretybond
holdercomesin,hiresanewcontractorandpaystocompletetheproject.Itcanthenpursuetheoriginalcontractortorecovercosts,butthe
entityforwhichtheprojectisbeingbuiltisnotinvolvedinthatdisputeitsimplyretainsthebenefitofafinishedproject.Asdescribedherein,
suretiescanguaranteeperformance,projectdeliveryontimeandonbudgetandpayment,suchaspaymentofsubcontractorsorsuppliersas
wellasotherpartsofconstructionbiddingandcompletion.

Contractorsanddeveloperswillberequiredtobuyinsurancefromreputableinsurers,andberequiredtoreplacetheirinsuranceiftheinsurance
companybeginstofacefinancialdifficulty.Boston2024willworkwithinsurancebrokersandcompaniesinordertoprovidedevelopersand
contractorswithalistofpotentialprovidersofsuchinsurance.Thispreclearingofpotentialproviderswillhelpmanagethecostsandtimeof
puttingsuchpoliciesorsuretiesinplacebythedevelopersandcontractors.

Forthelargestvenues,suchastheOlympicStadiumandtheAthletesVillage,suchinsurancecouldincludecapitalreplacementtotheextent
neededtosupplementsureties.Capitalreplacementinsuranceisahybridofsuretypolicies,describedabove,andcontingentcapital.Such
insurancepaysintheeventdeveloperslosetheirfinancingafterconstructionhascommenced.Unlikeasuretyandperformancebond,itwould
guaranteenotonlytheperformanceofacontractor/developerbutalsothatofthelenderorfinancialinstitutionbackingtheproject.
Constructionsuretiestypicallyapplyonlytodevelopers/contractorsandnotlenders.Capitalreplacementinsurancewrapsaroundthe
developerandthecapitalstructurethedeveloperbrings.Likeasuretyarrangement,insurerswouldunderwriteandsignoffonthedeveloper
andthedevelopers'capitalsources,essentiallyprequalifyingtheirfinancialagreements,creditworthiness,financialstrengthandabilityto
completethedevelopment.Coveragewouldtriggerunderawidearrayofpossibilities(forexample,ifeitherthedeveloperorthebank
financingthedeveloperenterbankruptcyorsimplybackoutofthedeal).Table1providesdetailsontheinsurancethatwillberequiredofall
contractorsandsubcontractorsduringconstruction.

Table1.InsuranceProtectionDuringConstruction
Type

Amountof
Coverage

Expected
Premium

InsuredParties

Riskstypicallycovered

VenueConstruction
SuretyBond
PerformanceBond
BidBonds
Liability
Property

Dependenton
costof
construction

Premiumpaidby
contractors

Contractors;Boston
2024;CityofBoston

CapitalReplacement

Dependenton
costof
construction

Premiumpaidby
developers

Contractors;Boston
2024;CityofBoston

Other
BuildersRisk
Professional
Liabilitywithcost
overruncoverage

Dependenton
costof
construction

Premiumpaidby
contractors

Contractors;Boston
2024;CityofBoston

Thesetypesofinsurancecoverallphasesofconstruction.At
theoutset,abidbondguaranteesthatonceabidismade,the
bidderwillperformthecontractifitwinsthebid.Suretyand
performancebondscomeintoplayifthecontractorcannot
finishtheprojectortheprojectexperiencessignificantdelays;
theycoverthecostofreplacingorsupplementingthe
contractor.Liabilityinsurancecoversdamagetopeopleor
otherpeoplespropertyduringtheconstructionphase;
propertyinsurancecoversdamagetotheprojectitself.All
majorconstructionandinfrastructureprojectstypicallyutilize
thistypeofprograminordertomanagerisk.
Thistypeofinsuranceprovidescoverageifdeveloperscannot
continueduetoalackoffinancing.Itcanreplacethe
investmentfundsthatwouldhavebeenusedtobuildthe
Olympicvenues,givingtheprovideranequityposition.
Buildersriskandprofessionalliabilityinsurancecanprotect
contractors(andowners)ifcostsrunoverforcertaininsurable
reasons.Forexample,buildersriskpoliciescanprovide
coverageiftheprojectsstartdateisdelayedduetofire,flood,
orlossofmaterialsintransit.Professionalliabilitypoliciescan
providecoverageifacontractormismanagestheservicesit
provides,includingschedulesandlogistics,andissuedfor
thoselosses.Sometimesownersthemselvescanbuythese
typesofpoliciesaswell.

EstablishedMegaEventInsurance

AswithmanymajoreventsincludingpastOlympicandParalympicGamesandSuperBowlsasetofreadilyavailableinsuranceproductswill
overlaytheconservativebudgetandsitespecificcoverages,therebyfurtherincreasingtaxpayerprotection.Boston2024hasincludedinthe
plananumberofadditionalpoliciesthatwillprotectagainstliabilityexposuresduringtheGamesandthepotentialforlostrevenueshouldthe
Gamesbedisruptedforvariousreasons.

ThetypesofcoverageandestimatedcostsofpremiumsaresetforthinTable2.ThepremiumsforsuchinsurancewillbepaidbyBoston2024
aspartofitsoperatingbudget.TheBid2.0operatingbudgetconservativelyincludes$128millionforsuchpremiums,whichrepresentsthe
highendofarangeofpotentialpremiumsbasedoninitialestimatesfromexpertsintheindustry.Byutilizingacompetitiveprocesstoprocure
theinsurance,theactualpremiumsmaybelower.Inaddition,theamountofcoveragethatBoston2024isabletopurchasemaybebigger
andtheprogramwillbedesignedsothatifthelimitsofsomepoliciesareusedup,othersmaycoveranyadditionallosses.

Dependinguponthecircumstances,severaldifferentpoliciesmaybetriggered,somorethanonepolicywouldbedrawnupontocoveraloss.
Forexample,acatastrophiceventwouldlikelytriggercoverageundermultiplepolicies.Amajorstormorterroristthreat,forexample,that
affectedavenueandcausedcancellationofaneventwouldprovideaclaimundertheeventcancellationpolicies.Ifthecancellationofsuch
eventinturnledtodecreasedparticipationbyathletes,lossofappealwouldbeavailable.Failuretodeliverthatvenuecouldtriggerobligations
totheIOCundertheHostCityContract,sotheliabilityandindemnitycoverageundertheHostCityContract/GamesOperatingAgreement
Policywouldbeavailable.Furthermore,allsuchcoveragewouldbefurtherenhancedbytheadditionalprotectionsdescribedbelowinPartIV,
OverarchingExcessInsuranceCoverageandAdditionalProtections.WiththeestimatedconservativecoveragelevelssetforthinTable2,the
totalcoverageinsuchexamplewouldbe$1.45billion.

Likethesuretybondsandotherinsurancefortheconstructionofprojects,theseinsurancepoliciesarenotuniqueintheinsurancemarkets.
Mostmajorsportingandotherlargeeventsbuyeventcancellationinsuranceorlossofappealcoverage.Tradecreditinsurance,whichhelps
ensurethereceiptofrevenuesfromsponsors,animportantsourceofrevenuesfortheoperatingbudget,alsoiscommoninmanytypesof
businessarrangementthatrelyonsponsorshiprevenues.EventhecoveragethatsoundsuniquetotheOlympicandParalympicGames,the
HostCityContractandGamesOperatingAgreementcoverage,consistsofdifferenttypesofcoveragesfrequentlyobtainedbybusinesses
whentheyundertakeobligationsundercontracts.ThiscoveragewouldbeinplaceintherunuptotheGames,followingtheInternational
OlympicCommitteesselectionofBostonashostcity;duringtheoperationoftheOlympicandParalympicGames;andthroughthewinddown
periodfollowingtheOlympicandParalympicGames.Table2providesdetailsoninsuranceprotectionbeforeandduringtheoperationofthe
OlympicandParalympicGames.

Unlikethesuretybondsandotherinsurancefortheconstructionofprojects,thistypeofinsurancedoesnotprovidedollarfordollarcoverage
ascomparedtobudget.Theriskofascenarioinwhichnoneoftherevenuesintheoperatingbudgetareavailableandthusrequireevenmore
thantheamountcoveredbytheinsuranceandtheothercontingencyisdeminimis.

Table2.InsuranceProtectionBeforeandDuringOperationoftheGames
Type

Amountof
Coverage

Estimated
Premium

Insured
Parties

Riskstypicallycovered

EventCancellation

$500million

$5million
$7million

Boston2024;
CityofBoston

$3million
$5million

$1million
$2.5million

Boston2024;
CityofBoston

$1million
$2.5million

Boston2024;
CityofBoston

Eventcancellationinsurancecoversthecostsincurredandlossofrevenuesuffered
ifaneventiscancelled(orrelocated)throughnofaultoftheorganizerfor
exampleduetoanaturaldisaster,anactofterrorism,adisruptioninthepower
supply,oralaborstrike.Alleventsi.e.,theentireOlympicswouldbecovered.
ThisinsurancewouldcoverdamagesowedtotheInternationalOlympic
CommitteeifBostonischosenasaHostCitybutisunabletomeetitsobligations
undertheHostCityContract/GamesOperatingAgreement.
Thistypeofinsurancewouldstepintoprovidecoverageifasponsorofthe
Olympicscannotmeetitsobligations(e.g.,becomesinsolventorcannotmake
paymentsinaccordancewiththeagreedtotermsandconditions).
Lossofappealinsuranceprovidescoverageforreducedticketsalesand
attendanceiftheeventsbecomelessappealing;if,forexample,acompetitor
countrydropsoutoftheevent.Itcouldalsocoveralossofadvertisingor
broadcastrevenueinsuchaninstance.

HostCityContract/ $100million
GamesOperating
Agreement
TradeCredit
$100million
$200million

LossofAppeal
$350million

Boston2024;
CityofBoston

OverarchingExcessInsuranceCoverageandAdditionalProtections

Incombinationwiththepriorthreelayersofprotection,Boston2024sgeneralinsurancecoveragedescribedherein,typicalofmostbusinesses,
alongwithitsoverarchingexcesscoverage,wouldmakeBoston2024themostinsuredOlympicandParalympicGamesinhistory.Whilethe
insuranceproductsarenotnecessarilynew,thecompoundingeffectsofmandatinghighqualitycoveragefromallcontractorsandthemultiple
layersandtypesofcoverageacrossinsurerswouldprovidetaxpayerswithunprecedentedlayersofprotectionincomparisontopriorOlympic
Games.

Boston2024willhavebroadcoveragethatwillprotectotherareasofinvestmentandpotentialrevenue.Dependinguponthenatureofthe
disruption,thesepolicies(outlinedinTable3)couldprovideoverlappingand/oradditionalprotectionwiththepoliciesdiscussedabove.

Thegeneralinsuranceprovidedwillbetypicalofthatpurchasedbybusinesses,fromsmalltolarge,toprotectthemfromthecoststhatcan
arisefromtheirinteractionswiththepublic.Forexample,ifanattendeeattheOlympicStadiumfallsandinjureshimself,thisinsurancecan
coverthecostsconnectedwiththatinjuryanddefensecostsforanyrelatedlawsuits.Anotherexampleisifpropertygetsdamagedduringthe
10

courseoftheOlympicandParalympicGamesbyGamesemployeesorequipmentthepublicliabilityinsurancewillcoverthecostsofthe
damage.Thisisanextremelywidelyusedfromofinsurance,andtheexpectedpremiumsareinahigherrangethantheothercoverages
becausecoverageismorelikelytobetriggered.Additionally,Boston2024willplacethetypicalcoveragesforemployeesoftheOlympicand
ParalympicGamescarriedbymostbusinesses,suchasautoinsurance.

Insuranceintheeventofaterroristattackisanunfortunatenecessitynowadays.Ithelpstocovertheadditionalcostsifaneventiscancelled
becauseofanattackorbecausetheareaneartheeventcannotbeaccessedduetoaterroristthreat.

Table3.AdditionalInsuranceProtections
Type
Public
Liability&
Indemnity

Terrorism

Amountof
Coverage
$500million

Expected
Premium
$60million
$90million

$250million $1million

$2.5million

$1million
Various
TBD
miscellaneous
$3million

InsuredParties

Riskstypicallycovered

Boston2024;City
ofBoston/
Commonwealthof
Massachusetts;
USOC;IOC
Boston2024;City
ofBoston

Thisisacommontypeofinsuranceusedbybusinessowners.Itprovidescoverageifa
personisinjured(orapersonspropertyisdamaged)ontheinsuredspropertyorby
aninsuredsemployee.Italsoprovidescoverageforcontractualliability.

Boston2024;City
ofBoston

Terrorisminsuranceprovidescoverageforthelossofrevenueandotherfinancial
lossesintheeventofaterroristattack(forexample,ifanOlympicsiteisdamagedorif
itcannotbeaccessedafteranearbyattack).
Thisincludesauto,travelandothercoveragesforemployees(and,ifneeded,for
participants)oftheOlympicandParalympicGames.

Lastly,inadditiontotheseparatecoveragesdescribedabove,Boston2024planstoputintoplaceanoverarchingexcesspolicythatwillprovide
additionalcoverageoverandabovemanyoftheindividualpolicieslistedabove(seeTable4).

Table4.OverarchingPolicy
Type

Amountof
Coverage

Expected
Premium

InsuredParties Riskstypicallycovered

AllRisk
Excess
Coverage

$500million

$10million
$15million

Boston2024;
CityofBoston

Excessinsuranceisakindofumbrellapolicythatprovidesadditionalcoverageoverand
abovetheamountsinsuredunderthePublicLiability,EventCancellation,andGames
OperatingandHostCityContractpolicies.Itisawayofaddinganextralayerofbroad
protection.Thetermsoftheexcesspolicycanoftenprovideevenbroaderprotection.

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TimingandNextSteps

Boston2024hasbeenveryactiveandwillremainactivewiththeinsurancemarketstoseekadviceonpolicydevelopment,budgeting,and
otherinnovativesolutionsforensuringmaximumpossibleprotectionfortaxpayers.

Boston2024seffortshavebeenledbyHeidiLawson,headofMintzLevinsCrisis,RiskManagementandExecutiveProtectionPracticeanda
30yearveteranoftheinsuranceindustry.InadditiontopracticinglawinNewYorkandMassachusetts,HeidialsoisasolicitorinEnglandand
livedinLondonduringthetimeleadinguptoandincludingthe2012OlympicandParalympicGames.Asignificantfocusofherpracticeis
advisingclientsonhowtomanagecomplexrisksthroughinsuranceanddraftingappropriatepolicylanguage.Sheisalsoanexperienced
insuranceunderwriter,havingearnedthedistinguishedCharteredPropertyandCasualtyUnderwriter(CPCU)designation.Heidiandherteam
havespenthundredsofhoursworkingwithexpertsintheinternationalinsurancemarketstodevelopBoston2024sinsuranceprogramplan.

AmongthedifferentexpertsintheinternationalinsurancemarketsconsultedinthisprocessisAon,aleadingglobalproviderofrisk
management,insuranceandreinsurancebrokerageandhumanresources,with66,000employeesinover120countries.Aonhasservedasrisk
advisorformanyhighprofileeventsincludingOlympicGames,andPanAmericanGames.

WillisGroupHoldingsplc,aleadingglobalriskadvisor,insuranceandreinsurancebroker,with18,000employeesinover400offices,including
someoftheworldsleadingexpertsonanalytics,modelingandmitigationstrategiesattheintersectionofglobalcommerceandextreme
events,alsoreviewedandcontributedtotheriskandinsuranceplan.Willishasservedasriskadvisorforseveralhighprofileeventsincluding,
butnotlimitedto,theOlympicGames,theNCAABasketballTournament,theSuperBowl,theCollegeFootballPlayoff,theTourdeFrance,
theGoodwillGames,theKentuckyDerby,theWorldSeries,andtheMajorLeagueBaseballAllStarevent.

Boston2024alreadyhascertaininsuranceinplace,includingthepoliciesthatprotecttheCityofBostonanditstaxpayersfromobligations
undertakenintheBidCityAgreementamongtheUnitedStatesOlympicCommittee,Boston2024,andtheCityofBoston.

AsBoston2024continuestorefineitsbid,itwillissuearequestforproposalstoinsurancebrokerstoenlistanumberofbrokersinfurther
detailingandenhancingtheinsuranceprogram.TherequestforproposalsisexpectedtobeissuedbyAugust1.

Noneoftheabovedescribedinsurancewillbeputinplaceuntilitisneeded.Inthecaseofmostofthepolicies,thatmeansthattheinsuranceis
notbounduntiltheobligationsareundertakenwhichwouldhappenaftertheIOCsselectionofahostcityin2017.Justasitwouldbe

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prematuretopurchaseautoinsurancebeforebuyingacar,itisprematuretoacquiremostoftheinsurancedescribedaboveunlessanduntil
awardedtheOlympicandParalympicGames.

Inaddition,Boston2024isdevelopingaplantofundanydeductiblesfortheinsurance,includingthroughatrustthatisfundedfrom
contingenciesandotheravailablerevenues,whichwillbeinvestedandavailabletopayinsurancedeductiblesandothercostsrelatedto
insuranceclaims,toprovideyetanotherlayerofprotectionfortaxpayers.

InsuranceIndustryPerspectives

AfterevaluatingtheBoston2024insuranceplan,leadersfromtheinsuranceandreinsuranceindustryhaveofferedthefollowingperspectives:

Riskmanagementandinsuranceplansofthisscaleandcomplexityarenotunprecedented.Infact,eachtypeofpolicyhasprecedents
eitherinpastOlympicGamesorothermajorevents.TheBostonbidteamhasclearlystudiedtheriskmanagementstrategiesof
previoushostcitiesandhasdevelopedacomprehensiveapproachtomanagingtherisksassumedbythecity.Wehaveevery
expectationthattheworld'sinsurancemarketswillenthusiasticallysupporttheBostonbid.

RandyNornes,ExecutiveVicePresident,AonRiskSolutions

ThecollectionofinsurancepoliciesoutlinedbyBoston2024isattainableandfeasible,andthepremiumpriceestimatesare
conservativeandappropriate.HostingtheOlympicandParalympicGamesisalargeundertakingwithmanymovingparts,butinsurers
havethecapabilitytoassembleanddelivercomprehensivepoliciestoeffectivelymitigatetherisksinvolvedwithhosting.
GlennMcGrath,ExecutiveVicePresident,WillisGroupHoldingsplc

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