The story highlights that sports betting markets were used to price and place the risk. Betting and sports are interesting topics for the man on the street and headlines sell papers but calling the coverage a gamble, which the article does is just wrong.
What happened is the RFU agreed bonus payments with the Rugby Player's Association (RPA) for performance at the Rugby World Cup in New Zealand. These bonuses are to reward players for the hard work and commitment involved in reaching the last 4 of the competition. Next the RFU looked at the potential payments in the context of their budget and decided to source a quote to "insure" the liabilities. They locked-in a price today so they can budget with certainty.
Most of the governing bodies are taking out this type of coverage and though it is available in the insurance market, the betting markets are better and more cost-effective when pricing this type of risk.
The type of market that a risk is placed in doesn't make it a gamble. The RFU is simply offsetting risk in the most cost effective manner available to them. Ryanair isn't gambling when it hedges fuel costs by "betting" on oil and neither are the RFU in this case.
No comments:
Post a Comment