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FIFA came up with a similar asset class again in 2003 when it came up with an instrument to transfer to investors the risk of the 2006 World Cup being postponed. The instruments issued by FIFA were similar to catastrophe bonds issued to transfer the risk of an event being cancelled due to natural calamities like earthquake or hurricanes.
The total deal was valued at Euro 400m equivalent deal and carried out by Credit Suisse First Boston.

The deal was structured such that the securities issued would mature after the final game in July 2006 but the investors would lose their principal amount if the World Cup were to be postponed by more than 12 months, i.e., postponed beyond August 2007. The investors would be paid interest for the above period of time.

In case of catastrophe bonds, the risk can be generally measured by studying meteorological data. However, in the case of the World Cup, the situation is complicated by the very real possibilities of threats to players of leading teams going on a strike; the first team players of the English team were very close to boycotting a Euro 2004 qualifier in 2004.

There is also the looming threat of terrorism accompanying the biggest sporting event in the world. The securities recognized "acts of war" to include major actions by states in addition to the risk from terrorist attacks.

The securitization of the World Cup by FIFA is something unique in the sporting world; it also shows that the world of football today involves huge amounts of money, and hence, the urge on the part of FIFA to secure its future earnings. The deal also is indicative of the threat of terrorism faced by any event of the scale of the World Cup.

Concluded.

* Contributed by -
Saurav Chatterjee,
1st Year Student, PGDM,
IIM Calcutta.