The Evolving Business Of Football: ‘Insuring Against The Cost Of Success’

‘This article was written for and first published on LawInSport – click here

Have you ever considered that a football club may be financially worse off in the short-term for achieving promotion or winning a trophy?

You would be forgiven for dismissing this as a bizarre concept.

The idea some clubs need to consider insuring against the cost of paying players and managers cash incentives for winning a trophy, league title, or even gaining promotion may seem unusual.

However, clubs are increasingly looking at ways to protect themselves from the financial risks associated with success.

To find out more about how clubs are using insurance to protect against increasing levels of performance bonus liability, I interviewed Saul Paine, Business Development Manager at Hedgehog Risk Solutions, who specialises in insuring contractual bonus liability in football and a number of other sports.


Money and success often go hand in hand in professional sport, with successful performance bringing about significant financial gains. This is no more evident than in professional football, where wages at the top level have steadily increased over the last 10 years (Deloitte Annual Review of Football Finance1).

With clubs and their wealthy benefactors continuously demanding better results, it is no surprise that performance related bonuses can create significant exposures that can run into the millions.

Performance bonuses have long been a part of football club culture and clubs have readily adopted player contracts that remunerate players for a job well done based on a wide range of conditions.

Player contracts now typically include bonuses linked to a number of conditional circumstances i.e. number of appearances, loyalty bonus, performance targets (e.g. goal scoring bonuses / clean sheets), as well as an additional share of the clubs bonus pool, which can be linked to a specified performance measure such as promotion, winning a specific trophy or qualifying for European competitions2.

Saul provides some examples to illustrate this point:

“In 2012, the Independent3 reported that Man City paid £6.2m across the squad for winning the Premier League as part of their bonus incentive scheme, which also included separate bonus pools for the Champions League, FA Cup and Carling Cup, which in total amounted to just over £14m.”

“This is not an uncommon as all clubs up and down the leagues will have their own bonus schedule with varying levels of liability and different structures”

“Such bonus schemes are not limited to the domestic game either. A large majority of the National Associations will have had a pre-agreed bonus schedule for the World Cup and other major international tournaments. For example, players in the German national team will have brought home more than just a winners medal in the summer, with each squad member picking up a reported bonus of €300k for their triumph in Brazil.4

Whilst in most cases these bonus structures are designed to be offset against any increase in revenue or prize money, clubs can easily become over exposed financially even when they achieve success on the pitch. An infamous example being Portsmouth Football Club, when in 2010 having made the FA Cup final, they were not able to field certain players as they could not afford to trigger related bonus payments.5

Whilst the above demonstrates that these schemes can be successful there have also been situations where bonus schedules have had an adverse financial impact (see Portsmouth example above).

The Football Association Stance On Bonus Insurance Schemes

In accordance with The Football Association (“The FA”), each club is required to submit their bonus schedules to The FA prior to the start of the season (Rules C 1 (b)(iv), The FA Rules and Regulations of The Association).

In 2012, The FA introduced the Bonus Insurance Scheme Policy (“BISP”) after they had “been made aware that clubs may wish to enter into insurance arrangements to cover contractual liabilities that would become payable should a particular competitive outcome occur, for example promotion bonuses to players.” 6 The FA took “the view that such insurance arrangements have similar characteristics to a ‘bet’ and therefore may contravene Rule E8 in certain circumstances.”7

However, the suggestion that The FA consider this type of insurance similar to bet is dispelled in the policy as Saul points out that “it would seem the FA are keen to differentiate between their regulations on betting and insurance contracts in regards to performance bonuses.” The FA’s policy states:

“Following detailed consideration together with its stakeholders of the issues arising, and recognising the particular circumstances of clubs and their desire to mitigate their financial exposure, The FA has agreed that Clubs may be permitted to enter into certain prescribed arrangements as an exception to Rule E8.” 8

Saul adds, “This policy has been introduced as an exception to Rule E8 and it recognises that clubs should be able to manage their exposure through regulated insurance contracts, providing clubs fulfil each and all of the criteria the FA outlines in their policy. This includes the club receiving prior written consent from the FA (see BISP 3.3).”

Saul is strongly supportive of The FA’s approach on this matter, “The FA has been forward thinking in introducing such a policy. This policy ensures it is a regulated activity and that clubs are acting in the best interests of the game when they are entering into such agreements and have recognised that success can create significant financial liabilities.”

This ensures clubs are taking out insurance with Financial Conduct Authority approved insurers and are not entering into private financial agreements with wealthy individuals or private companies that are not financial services regulated (see BISP 3.2).

What Is The Benefit To Clubs For This Type Of Insurance?

Saul is of the view that “for clubs with restricted financial resources, contractual bonus insurance is one way that clubs can offer bonus incentives that can have a significant impact on the motivations of players whilst controlling their financial exposure. For some clubs it will allow them to attract and retain players in which they are investing a lot of money in, whilst also protecting themselves financially when they are doing well. In that respect, when used correctly these schemes can help clubs to:

  1. budget with certainty
  2. limit their exposure and protect the balance sheet
  3. incentivise players for specific competitions/performance objectives
  4. reduce wage inflation on basic salaries
  5. implement a more sustainable remuneration model
  6. act inline with the principles of financial fair play”

I wanted to know if other businesses use this type of insurance. Saul assures me that “contractual bonus insurance is something that apparel manufacturers and sponsors have widely used to cover their liabilities linked to an ambassador’s performance, typically in golf or tennis – this has helped them determine what sponsorship agreements offer a better return on investment for them. From that point of view, sponsors appear one step ahead in the thought process as they seek to negotiate higher performance related deals with less of a focus on larger retainers, which may reduce the overall costs involved. For example, it is not uncommon for us to receive a call from a sponsor wishing to assess what coverage terms are available before or during the negotiation stage with athletes or clubs, in order to weigh up the costs of entering into a new sponsorship agreement.”

Effects Of FFP And The Growing Interest In This Cover

Clubs also now have to navigate the financial regulations when competing in European competitions and in their domestic leagues, which has made them more prudent in their financial management. Therefore clubs will increasingly be looking to different ways to protect against liabilities and access alternative means of finance. Saul’s view on how the insurance market fits into this is an interesting one:

“Certainly the introduction of FFP has brought the topic of financial sustainability and risk management to the fore and whilst it is relatively a new concept in football it is beginning to have an impact on how clubs are run both internally and also how they do business with other clubs. Take the recent transfer window for example; the FFP regulations made a noticeable impact in the window, arguably for the first time, as it was apparent clubs accepted they could only afford to invest what they generated in revenue. Real Madrid (€113m), FC Barcelona (€79m), Atletico Madrid (€77m), Chelsea (€94), Liverpool (€92m) and Manchester City (€62.2m) all recouped record figures for player income – that was in figures released by The Soccerex Transfer Review by Prime Time Sport.

Whilst there is no direct relationship between the emergence of contractual bonus cover and the introduction FFP it is certainly a product that resonates with UEFA’s primary objectives:

  • to introduce more discipline and rationality in club football finances
  • to decrease pressure on salaries and transfer fees and limit inflationary effect
  • to encourage clubs to compete with(in) their revenues
  • to protect the long-term viability of European club football
  • to ensure clubs settle their liabilities on a timely basis

As a result, we have certainly noticed a large increase in clubs taking an interest in this type of cover and taking stock of what options are available to them.

When you consider UEFA’s primary objectives you can begin to see why more clubs are taking performance related pay more seriously. This is an area that has received some media coverage in the past.9

For example, comments from Liverpool’s Managing Director, Ian Ayre, in 2013 about Liverpool’s shift towards a more performance related pay structure show that this is something that is on the agenda of clubs even at the highest levels of the game.10

With that in mind, I expect financial liabilities linked to a clubs performance will grow rapidly in a number of different areas over the course of the next few years and as result clubs should be looking more closely at the benefits contractual bonus cover can offer them.”

How Other Football Associations In Europe Regulate Insurance Policies?

One question that immediately sprung to mind during our discussion was ‘how does this approach compare to other leagues?’, Saul provided an example: “Whilst other football associations on the continent may require clubs to lodge their insurance policies with their association, not necessarily for approval but for full disclosure, there is no other recognised ‘Bonus Insurance Scheme Policy’ elsewhere in Europe, and therefore there is more flexibility for clubs on the continent to also insure against negative outcomes. This is something widely used by clubs in respect to relegation, lower league position, or failing to qualify for European competition. They also have the advantage of looking at insurance of this nature at any point in the season”.

Being cynical this does make me consider how this effects the integrity of European competitions where it is conceivable that and English club is playing a club where they have been able to fund a squad because they do not bear the same financial risk as they have offset their exposure to relegation or non-qualification. Although it may be unlikely, it is conceivable that a club in financial distress could be incentivised to lose to help ease liquidity issues; pay-outs from insurance policies of this nature can help clubs in such circumstances as they will receive the funds more quickly than those derived from the distribution of broadcasting or competition revenues.

Other sports like cricket and rugby have also outlawed betting, for example in rugby the IRB regulations enforce a global ban on betting for ‘connected persons’ (see IRB Anti-Corruption and Betting – Regulation 6.1.411), something the RFU has readily acknowledged in their own regulations (RFU Regulation 17.1.4 – Anti-Corruption and Betting12).

Saul believes that we may see other national sports association and international federations make “the distinction between betting and these permitted insurance arrangements as an exception [BISP’s] as they look to regulate this activity through similar bonus insurance schemes


Insurance is tool that is used widely to protect consumers and businesses alike. It seems The FA have been proactive and pragmatic in their approach to how football clubs can use contractual bonus insurance whilst protecting the integrity of the sport. As more money flows into sports across the globe it will be interesting to see how other governing bodies approach the regulation of insurance linked to performance related bonuses.

As always, your comments and feedback on this article are welcomed.

By Sean Cottrell

Sean is the founder and CEO of LawInSport. Founded in 2010, has become the “go to sports law website” for sports lawyers and sports executives across the world.  @SeanLawInSport

Saul is Business Development Manager at Hedgehog Risk Solutions, a specialist sports insurer with particular expertise in managing financial risk linked to sports performance. Saul manages the companies football related business – specialising in contractual bonus cover and revenue protection, and has delivered insurance and risk management solutions for a wide array of professional football clubs from across Europe. @hedgehogrisk


  1. ‘Deloitte Annual Review of Football Finance 2014’,, accessed 18 November 2014,
  2. R Berry, ‘Bonus structures in English professional football’,, 16 April 2014, accessed 4 November 2014,
  3. S Wallace, ‘Manchester City bonuses enough to change a life (if they were not already millionaires)’,, 31 July 2012, accessed 18 November 2014;
  4. G Akoto Boafo, ‘Germany to pay 300,000 euros for World Cup win‘,, 23 December 2013, accessed 18 November 2014,
  5. ‘Portsmouth’s FA Cup final dilemma: the seven players who may not feature’,, 12 April 2010, accessed 18 November 2014,
  6. Policy 1.2, Bonus Insurance Scheme, The Football Association
  7. Policy 1.3, Bonus Insurance Scheme, The Football Association
  8. Policy 1.4, Bonus Insurance Scheme, The Football Association
  9. S Ingle, ‘KPIs and GPS put the geeks in charge of players’ pay packets’,, 12 May 2013, accessed 18 November 2014,
  10. R Bailey, ‘Liverpool’s Move Toward Performance-Related Pay Is the Future of Football‘,, 14 May 2013,
  11. IRB Regulation 6. Anti-Corruption and Betting,, accessed 18 November 2014,
  12. RFU Regulation 17 – Anti-Corruption and Betting, accessed 18 Novmber 2014,

Financial Fair Play is incompatible with business

Gary Tipper_PalatineGary Tipper, managing partner at Palatine Private Equity, discusses the business of football, and how the new Financial Fair Play rules are incompatible.




Almost every business in every sector is built upon the idea of competitive advantage. Firms will do whatever it takes to find a gap in the market, including accepting losses for the first few years. Sadly, it seems that one of the UK’s most lucrative industries, and one Manchester is particularly good at, seems not to agree.

I am, of course, talking about football. Having seen Manchester City spend and lose millions over the first few years after being taken over by Sheikh Mansour, UEFA decided to solve a problem that never existed by creating the Financial Fair Play (FFP) regulations. As a hardened City fan, the words Financial Fair Play are enough to make my blood boil, especially when considering the fair aspect.

Before the regulations were announced, I think most football fans thought the idea of FFP was to make sure clubs were not taken over by disreputable owners. The likes of Leeds and Portsmouth have experienced this in recent years, with mis-management leaving the clubs debt-ridden and ultimately heading for administration. No one wants to see this happen again, as in the end it is the fans that really suffer.

However, what UEFA have come up with is a system that effectively means that the clubs with the largest turnovers are the ones that can spend big in the transfer market, protecting the old order of European football. No other industry in the world blocks new money being invested in it, which is essentially what UEFA is effectively doing to European football. Whether fans like it or not football is now a huge global industry and should be dictated by market forces not by an industry body trying to protect the old order.

Imagine if this sort of protectionism had happened in the technology sector, which in the 1960s and 1970s was dominated by the big hardware players like IBM. Had rules stopping businesses losing money been in place, companies like Apple, Google, Amazon and Facebook would not exist. Each of these household names lost millions if not billions in their development years, enabling them to become the large organisations that ultimately transformed an industry and broke up the old monopolies that existed.

Why should football be different? If money hadn’t come into the likes of City, Chelsea, PSG and others, European football would be an oligopoly for the foreseeable future – making it incompatible with business.

Here football can learn a few lessons from business. Instead of the current rules, make any new owner put up to two years running costs in a blocked account that is used if they decide to remove their support, ensuring clubs avoid administration. This would also have the effect of keeping away the buyers without any real financial substance.

When looking at sustainability, it is also important for the rules to focus on debt levels. In the past too much debt has led to the downfall of many clubs, but under FFP, it is currently seen as acceptable for United to have £500m of debt and Real €600m of debt while City are punished despite being debt free. The £50m fine handed to the Blues is another clear example of the real aim of FFP – further establishing the status quo.

As a global industry, the rules governing football should be along the lines of the rules that govern businesses. With the current rules being incompatible, they should be challenged as I think it is best for business. Manchester has had a great footballing history and with the emergence of City in the last five years should have an even better future, dictated not by UEFA, but by market forces

Financial Fair Play in football has given marketing and data management a major boost

sa_blog_header_0 The FIFA World Cup is now a distant memory and we’re back to the domestic merry-go-round as we head towards the new season. Which players are your team signing? How much are they spending? How much are they allowed to spend?

FIFA’s legacy to the club game, Financial Fair Play (FFP) is shaping a new approach. FFP is a rule which prohibits clubs spending more than they earn. For some it’s an unnecessarily restrictive practice that only football could bestow upon itself, while for others it’s a justified, protective napkin placed in the lap of clubs who can’t feed themselves properly. Fans (naturally) don’t like it, teams are (predictably) wrestling with it, but for the marketers, I think it presents a tremendous opportunity.

The focus, of course, is on transfer budgets, player salaries and overall accountability, but has anyone stopped to consider how FFP will impact upon a club’s day-to-day diet of customer relationships and one-to-one marketing?

The demand that spending should be balanced by operational income means the link to data management is, for me, fairly obvious.

FFP drives the whole issue of income beyond the owner’s pocket and into regular revenue streams. If approached correctly, FFP is not restrictive, it’s a massive marketing opportunity.

The need to generate income is reflected in everything a data management company like Sports Alliance, does for its clients. Product and business development is a process which effectively ‘talks’ to the true supporters who follow the club and spend money. The club wants more of that type of fan of course, but the fan is also a vehicle to support wider income generation. At the top level, massive TV exposure brings in shirt sponsors and kit manufacturers who love the guaranteed visibility. Clubs sell the branded shirts to the fans and visibility feeds popularity – popularity feeds visibility.

TV revenue is wonderful in its own right but the bonus-ball is that live games project your ‘brand’ across the globe to all those who can’t come to the ground. Based on ‘eyeballs’, it’s a tremendous deal all round and yes, it certainly helps the shirt-selling business.

But what if the TV companies become less interested? For starters, if you don’t continue putting ‘bums on seats’ and the stadium looks empty, the product becomes diluted. The conundrum is that TV provides an opportunity to watch outside the stadium in homes across the world, but the stadium still has to be full to make it appealing. While it is, you have a marketing opportunity with the billions who are watching across the oceans so it’s in your interest to ensure the mystique of a competition that’s played thousands of miles away doesn’t dissipate. It’s the fans that give it gravitas, so the fans must be embraced. Good CRM conducted by clubs can safeguard that process and actually support growth over the long term.

Behind the FFP headlines, it’s clear that clubs are now looking to tap into good data management and customer relations and thus, increase their longer-term earnings. It works for clubs at any level too because the local market is still vital and one you ignore at your peril – even if if you’re world famous. This is exactly where data control comes into play – whatever level you play at – and where the next step, Propensity Management then comes into its own.

On a supporter database, the propensity for a fan who watches on TV in Asia to actually buy a season ticket for their favoured club, is clearly going to be less than a supporter of any club who lives locally. But the fan in Asia can still buy merchandise. Good CRM will afford greater earning power over the longer term and Propensity Management identifies the likelihood of a fan anywhere in the world to engage in a certain way. Understanding what they’re likely to want – or not want – then develops a communications’ relationship that is enjoyed by both sides of the deal.

FFP dictates that in the coming years, the level of equity investment an owner can make to offset operational losses will diminish, so something has to give. Operational income is being given far greater emphasis by FFP than before, because non-compliance can result in competitive sanctions or even tournament bans.

Of course, there is always the short-term option of making the most of your current contract-driven popularity and adding another nought to the next sponsorship deal. All you do then is shove the players on yet another plane for one more exhibition game. But what about all those eyeballs finally viewing the players at close quarters? If you can tap into their potential, you can use a solid CRM approach to develop a long-term income stream that eases the path towards FFP compliance.

In which case, why wouldn’t you?