By Carolyn Cohn and Noor Zainab Hussain
LONDON (Reuters) – Insurers are going through a $2-3 billion loss if the Tokyo Olympics are cancelled this 12 months, amounting to the biggest ever declare within the international occasion cancellation market, brokers say.
With lower than six months till the Games are because of begin, the competitors will high the agenda when the International Olympic Committee’s (IOC) govt board meets this week.
The Olympic physique, which is able to meet remotely, finds itself in an identical state of affairs to March final 12 months, when it postponed the Games by 12 months because the COVID-19 pandemic shut down sport worldwide.
Much of Japan is now beneath a state of emergency because of a 3rd wave of COVID-19 infections.
The IOC and Japanese organisers have been adamant that one other postponement is not an possibility. So it seems extra possible the Games must be cancelled, moderately than postponed once more, if they weren’t capable of go forward in Tokyo this summer season.
Event cancellation insurers have had a tricky 12 months on account of the pandemic, with festivals, conferences and sporting occasions postponed or cancelled the world over. Broker Howden estimates COVID-19 occasion cancellation losses at $5-6 billion.
But cancellation of the Olympics “would be by far the largest. Mind-blowingly,” mentioned Simon Henderson, an govt director at dealer Gallagher.
“The Olympics is a World Cup, it’s a tennis tournament, it’s an athletics tournament. It’s swimming, everything all in one – definitely a huge headache.”
Analysts at Jefferies (NYSE:) have estimated the Tokyo Olympics is insured for round $2 billion, plus an extra $600 million for hospitality.
The IOC takes out round $800 million of safety for every Summer Games, which covers many of the roughly $1 billion funding it makes in every host metropolis.
In addition, the native organising committee in Tokyo may have taken out an extra coverage, estimated at round $650 million, whereas broadcasters are additionally insured for large sums.
“TV networks, sponsors, professional sports teams, entertainers and other organisations could all have event cancellation policies protecting their interests in the Olympics,” mentioned Leigh Ann Rossi, chief working officer at dealer NFP Sports and Entertainment Group.
Such insurance policies may have been purchased years prematurely and so would possible cowl cancellation because of infectious ailments. Event cancellation insurance policies taken out within the final 12 months exclude that cowl https://www.reuters.com/article/china-health-insurance-cancellations/insurers-rush-to-strip-coronavirus-from-event-cancellation-cover-idUSL8N2AC5XP?edition-redirect=in.
Many of the organisations concerned within the Olympics would have been capable of declare some prices on account of final 12 months’s postponement, for points equivalent to hiring venues or reprinting advertising brochures.
Tim Thornhill, a director at dealer Tysers, mentioned there was “no rule of thumb” as to how a lot of the whole insured worth of an occasion might be claimed beneath the postponement part of an occasion cancellation coverage.
But brokers anticipate any funds made final 12 months for postponement to be smaller than any cancellation pay-outs this 12 months.
Lloyd’s of London insurers are amongst these lively within the occasion cancellation market, together with worldwide insurers, and international reinsurers equivalent to Munich Re and Swiss Re (OTC:).
Munich Re has a $500 million publicity to the Tokyo Olympics, one supply beforehand instructed Reuters. Munich Re declined to remark.
Swiss Re has a $250 million publicity, its chief monetary officer John Dacey instructed analysts final 12 months.
German insurer Allianz (DE:) has signed an eight-year insurance coverage settlement with the IOC which took impact earlier this month, masking Winter and Summer Games, together with the Summer Games in Paris in 2024 and Los Angeles in 2028.
Given how far prematurely Olympics insurance policies are taken out, Paris will even possible be lined for postponement or cancellation because of infectious ailments, brokers mentioned.