James Ihaka

James Ihaka is a Herald reporter based in Hamilton.

Celebrities' sponsors get safety net

NZ insurer providing cover for meltdowns or disgraceful behaviour which could harm brand image.

Lance Armstrong. Photo / AP
Lance Armstrong. Photo / AP

Following a host of celebrity implosions, corporate sponsors are being offered insurance against their investments going bad with disgrace, non-appearance and lack of performance.

As the sponsors of shamed cyclist Lance Armstrong abandon him in droves, insurance brokerage Apex General is offering local sporting organisations and film-makers protection for the value of their sponsorship.

It is providing cover for a range of sponsorship costs including non-appearance, death, disability and disgrace and performance bonuses.

Apex general managing director James McGhie said this was new to New Zealand for sponsors looking to protect their investments.

The company's sports cover also gives protection against things such as non-appearance causing financial loss and a dive in reputation that sees their investment's value fall.

It also offers the same type of insurance for the film industry, which Mr McGhie said was more advanced in terms of cover.

"If you're a sports organisation and you have put $10 million into marketing a sportsperson, and they fail to live up to their end of the bargain, then you've just lost $10 million," he said.

"So what we're saying is, spend a little extra on insurance, and you can at least look at recovering those costs," Mr McGhie said.

"We're seeing a lot of young athletes who have a lot of disposable income do silly things, and plenty of of cases where they have strayed off the straight and narrow path," he said.

Fleur Revell, director at Impact PR, said there were risks when firms asked a celebrity or sportsperson to represent a brand.

While the sportsperson or celebrity brought attributes to the brand that consumers would see as desirable, enhancing its equity, if the person behaved in a way that conflicted with its core values it could significantly damage its credibility.

"And that is the risk that any brand must endure if they want to work with a celebrity or sportsperson," she said.

"The reality is few celebrities deliberately jeopardise the deals they have negotiated and are often tied to strict contractual conditions. However, they are human and they err."

Disgraced cyclist Lance Armstrong was dumped by sponsors Nike and Anheuser-Busch and others after the US Anti-Doping Agency banned him from the sport for life and ordered that his Tour de France titles be stripped.

The exact value of his deals with the two companies is not known, but Nike is the biggest spender on athlete endorsement deals in the world, with its annual report showing it has signed commitments for $3.2 billion worth of endorsement deals over the next five years.

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