FOOTBALL clubs have been warned they are taking unnecessary financial risks by failing to capitalise on recent rule changes that allow them to insure player bonuses.
The Football Association amended its rules last summer, meaning that English teams are now permitted to hedge bonuses, but the move appears to have gone almost entirely unnoticed by clubs.
Sponsors have long been able to insure bonuses due to sports teams and players in the event of success, and clubs can now do the same, although they are subject to strict criteria and assessment by the FA.
FA sources told City A.M. that no teams under their jurisdiction had taken up the opportunity since they changed their rules in July, while industry sources say clubs appear to be unaware of the option.
“It’s maybe a reflection of the fact that clubs haven’t always been run like businesses, with a few exceptions,” Rod Callaghan of Airton Risk Management, which offers such schemes, told City A.M.
He added: “We find it amazing that a move as significant and helpful as the Bonus Insurance Scheme should go so far under the radar. The FA has put something of real value in place that clubs would probably take advantage of, if only they knew about it.”
Rules stipulate that clubs may only insure bonuses based on positive outcomes such as winning trophies or promotion – to deter teams from effectively betting on themselves to lose – and must register any such schemes with the FA by 10 days after the August transfer deadline.
A trend towards clubs increasingly offering players performance-related contracts, as Barcelona are believed to do for all their squad, seems set to make bonus insurance schemes more appealing. It also comes amid efforts to curb wage inflation. Despite record revenues in the Premier League, the percentage of turnover being swallowed up by wages has risen to a record 70 per cent on average.
Liverpool managing director Ian Ayre declared in January that the Reds would seek to move towards more performance-based contracts for their players. Insurance experts argue that the financial rewards of success do not always cover the cost of bonuses, and cite Portsmouth’s deliberations over selecting players on large bonuses for the 2010 FA Cup final as an example.