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Edited Date/Time
1/27/2012 12:42pm
Wonder how much Chad Reed had to pay extra for his insurance premium/policy he took out against him winning his last outdoor title?, where he cashed in by taking the 2009 championship.
The way he is flying this season, reckon there will be some Lloyd's exec's with sweaty palms right now! on him cashing in again in 2011!
The way he is flying this season, reckon there will be some Lloyd's exec's with sweaty palms right now! on him cashing in again in 2011!
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There is a guy based out of LA that is the primary agent for motorcycle racing and works directly with the Lloyds folks in London. I used him a few times when buying a bonus program for a Road Racer.
Most of the OEM's use his services, as it pays to "buy" a bonus program if you are working with a fixed (racing) budget and only have a certain amount of money to spend. The premium is one lump sum which can be spaced out during the racing series. It is basically gambling, and pretty much anyone can buy a policy. In my case, the policy cost more than the bonuses in year one, (they won) but in year two, I got my monies worth out of it, and then some.
You can design your own payouts and time frames as well. For example, if you want to put a higher bonus for a certain event (say Daytona or Anaheim), you just put that in the small print. You can buy insurance for race wins, podium's, top five finishes, or just series overall results. Whatever it is you want to insure against, the underwriters will look at it and give you a number. Its pretty cool, actually.
and it's ALL GAMBLING...sheesh guys. the stock market to vegas is ALL GAMBLING
The entity that would be paying out (incurring the "loss") would be the one taking out the policy.
1. A contracted rider has a large championship bonus clause in his contract. The team owners/sponsors don't have enough cash to actually pay out the bonus, so they take out a policy covering them in the eventuality that they have to pay.
2. A guy like Reed takes a policy out for himself to increase his championship bonus.
Here is what Reed said about his "policy" after he won the MX title in '09...
“I’ve always done it, and most riders do it,” Reed says of taking out the insurance policy. “And if they don’t, they’re stupid -- or they just don’t have any confidence in themselves, or they aren’t in a position to win. But how much it costs is based on the riders, which is why some of the lower-ranked teams can offer huge bonuses, because it’s a big gamble, and for those guys to go win on those lower teams, it’s highly unlikely. For me, with my Lloyd’s thing, it’s difficult -- really difficult. With my track record of being consistent and being there week-in and week-out, I’m a high risk for them as a guy who can win races and championships. So there were a lot of terms and conditions in my policy that I didn’t necessarily agree with, or was pumped with, but I had no say in the matter. For example, if I’d have won this championship, but didn’t achieve three overall wins, I would’ve gotten no money at all. There was a stipulation that I had to win a minimum of three races, and a few other things in there as well. And I bought this policy when Ryan (Villopoto) was there, when I thought James (Stewart) was going to race, when I thought (Mike) Alessi was going to be there all year long, and it cost a good 300 grand to purchase it.”
Although he wouldn’t say how much it paid off now that he has fulfilled the obligations in the policy, Reed did say that it was the most he’s ever gotten for a championship, and “well over two (million dollars).”
#2, however, doesn't make sense since the "owner" of the policy would not be suffering a loss.
I'd imagine, purely speculating of course, that when a rider talks about taking out a policy on himself, he's probably really referring to a sponsor taking out the policy in lieu of a portion of their salary or other money. For instance, Rider A negotiates a $1M championship bonus and gives up $200K of salary from OEM B in order to cover the premiums.
Because OEM B would be liable for $1M in the event of it's rider winning the title, it has an insurable interest. Without that insurable interest or loss, it truly would simply be a bet.
He placed a bet on himself
Chad took two policy's out for supercross, one for a certain amount of wins, nd the other for the title, he missed on both.
Pit Row
Surprisingly, seems you can "bet" on most anything. A policy does not have to be for just wins or championships even, but to finish within a certain range, so mid-tier riders can even get a policy (or their team to cover bonuses) and the policies aren't always through Lloyd's.
Thinking about it, when I did the WWR $100,000 bonus, that was an insured policy, so I guess you can insure most anything as long as you can find someone to underwrite it
So, I was wrong in my earlier statement.
I was misinformed
Think of it this way, do you buy an insurance contract that pays you a large lump sum if your house doesn't burn down or your car isn't in an accident? Of course not, because you wouldn't be suffering a loss.
Reed might have placed a bet on his performance, but that's not an insurance contract. Any of his sponsors could have taken out a contract, however, if they had promised to pay him bonuses based on his performance. When he met the proper goals, the sponsors would be liable, or suffer a loss.
If he meets the requirements of the policy, like winning the outdoor championship, the insurance policy pays him
Here's a pretty good explanation of how insurance works:
http://www.solarnavigator.net/venture_capital/insurance.htm
Here's a site that talks about various sports policies. If you browse their products on the left, the contingency policies are apparent, but they are for sponsors/ employers, not the participants themselves.
http://www.hccsu.com/products/sports/conbonus.htm
Maybe as their own corporation on themselves personally, but they do.
Was told this morning by someone who would and does know. (don't ask)
He could certainly have taken out a policy that paid if he didn't win a title, assuming that he had a bonus promised to him for winning. In that case, not winning the title would have resulted in a "loss". The policy would probably have to be substantially less than the bonus would have been, however.
Post a reply to: Did Lloyds of London bump up Chad's Insurance premium this year?