(Bloomberg) -- Borussia Dortmund is using an unusual insurancepolicy to recover most of the income it is losing for failing toqualify for European soccer’s elite Champions League for the firsttime in five years, according to two people with knowledge of thearrangement.

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Germany’s only publicly traded soccer club is in the third yearof an insurance contract that protects against lost revenue frommissing the tournament, said the people, who declined to commentpublicly as the details are confidential. The deal has about 12underwriters led by Catlin Group Ltd. and XL Group Plc, theysaid.

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Dortmund, which had revenue of 260.7 million euros ($279.6million) in the fiscal year ended June 30, received 34.7 millioneuros in prize money for reaching the quarterfinals last season,competition organizer UEFA said. Only three team executives wereaware of the insurance policy, a requirement from the providers toprevent coach Juergen Klopp and his players from giving up onfinishing high in the league, one of the people said. DortmundChief Executive Officer Hans-Joachim Watzke, in an e-mail, declinedto comment.

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Such cover, banned by English soccer as a guard againstmatch-rigging, is becoming sought-after by executives at eliteclubs in other European countries, according to Tom Mitchell, adirector at London-based Sportsrisq Capital Ltd. It’s akin toairlines hedging on oil prices, he said.

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“It’s becoming a hot topic,” Mitchell said. In soccer, “like anybusiness, shareholders and owners need to be protected againstrisk,” he said.

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Shares Slide

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Not qualifying for the Champions League is among the largestfinancial risks for a club in Europe’s top leagues, Mitchell said.Shares of Dortmund, which will lose Klopp after the season, fell2.5% to 3.43 euros at 12:51 p.m., extending their 2015 decline to11%.

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Dortmund is ninth in the top German league after 29 of 34 games,and cannot qualify for the Champions League. The top three teamsreach the tournament with a fourth entering a qualifying round.Klopp said last week he’s leaving after this season, saying he’snot “the perfect coach for this exceptional club anymore.” FormerMainz coach Thomas Tuchel was hired to replace him.

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Dortmund took out the policy in 2012, when the team won itssecond straight Bundesliga title. The policy was renewed for athird time before this season. The underwriters would have had theoption to cancel the insurance if Klopp or three of Dortmund’s topplayers had left the team during the year, one of the peoplesaid.

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Dortmund, which hosts Eintracht Frankfurt on April 25, is sixpoints off sixth place, the last qualifying spot for thesecond-tier Europa League.

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English Ban

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So-called negative-outcome insurance was banned in Englishsoccer in 2012 to guard against clubs underperforming, according toRod O’Callaghan, director of Paddy Power Plc’s Airton RiskManagement which uses the Dublin-based bookmaker’s sports prices tohelp set premiums. A German league official said by phone it has nosuch restriction.

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Some insurers are uneasy about providing cover to clubs,according to Philip Hall, managing director in London at HCCSpecialty, a unit of HCC Insurance Holdings.

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“The moral risk can be significant if a club goes to the marketlooking for insurance against future negative performance,” Hallsaid. “The question we’d ask would be: Why are you doing this? Whatis their motivation?”

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A club like Real Madrid, which has reached the Champions Leagueevery year since 1997, might pay a premium of as little as 500,000euros -- or 5% -- to get 10 million euros of cover for notqualifying, according to Mitchell. Dortmund is paying closer to 30%of the amount insured, one of the people said.

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La Liga Hedging

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In Spain, teams have been hedging against relegation from LaLiga for years to protect themselves against a fall in revenue thatcan be crippling, according to former Deportivo La Coruna presidentAugusto Lendoiro. In 1995, Deportivo had a compensation clausewritten into its contract with television company Canal+ in theevent of it dropping out of the top league, Lendoiro said.

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In England, teams can only take out insurance against positiveoutcomes such as paying players performance-related bonuses. Teamsmust obtain approval from the Football Association and agree to thepolicy within the 10 days of the off-season player-trading windowclosing.

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Even so, Hall of HCC Specialty said he’d rather insure a jerseysponsor looking for cover against bonus payments than do businessdirectly with clubs.

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Soccer teams are “going to be in a better position than we areto know about the risk involved,” Hall said.

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Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

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