Insurers are facing a $2-3 billion loss if the Tokyo Olympics are cancelled this year, amounting to the largest ever claim in the global event cancellation market, brokers say.
With less than six months until the Games are due to start, the competition will top the agenda when the International Olympic Committee’s (IOC) executive board meets this week.
The Olympic body, which will meet remotely, finds itself in a similar situation to March last year, when it postponed the Games by 12 months as the COVID-19 pandemic shut down sport worldwide.
Much of Japan is now under a state of emergency due to a third wave of COVID-19 infections.
Event cancellation insurers have had a tough year as a result of the pandemic, with festivals, conferences and sporting events postponed or cancelled the world over. Broker Howden estimates COVID-19 event cancellation losses at $5-6 billion.
But cancellation of the Olympics “would be by far the largest. Mind-blowingly,” said Simon Henderson, an executive director at broker 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 have estimated the Tokyo Olympics is insured for around $2 billion, plus a further $600 million for hospitality.
The IOC takes out around $800 million of protection for each Summer Games, which covers most of the roughly $1 billion investment it makes in each host city.
In addition, the local organising committee in Tokyo will have taken out a further policy, estimated at around $650 million, while broadcasters are also 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,” said Leigh Ann Rossi, chief operating officer at broker NFP Sports and Entertainment Group. Many of the organisations involved in the Olympics would have been able to claim some costs as a result of last year’s postponement, for issues such as hiring venues or reprinting marketing brochures.
Tim Thornhill, a director at broker Tysers, said there was “no rule of thumb” as to how much of the total insured value of an event could be claimed under the postponement section of an event cancellation policy. But brokers expect any payments made last year for postponement to be smaller than any cancellation pay-outs this year.
