Despite the increasing uncertainty with regards to the financial hit to industries, Russell Group have modelled the exposure for companies and countries. In the first of these articles, we take a look at the impact on shipping.
Tokyo 2020: The Insurance Implications
08 April 2020 | Blog Post
The Tokyo Olympics have officially been postponed to 2021, making it the first such delay in the modern Games’ 124-year history. Among those who received the news with profound relief are Swiss Re, who faced a $250m (approximately £215m) loss if the event was cancelled. Swiss Re also announced further “mid-three-digit” exposures from other events being cancelled in the wake of Covid-19. During a report to investors, Swiss Re said that the company has a 15% global market share in event cancellation insurance, which includes cancellations in concerts or sports events, all of which could now be claimed.
Jefferies analysts estimated the insured cost of the Tokyo Olympics to be at $2 billion (which includes TV rights and sponsorship) along with an extra $600m for hospitality. The International Olympic Committee (IOC) usually takes out $800m of insurance coverage for each Summer Games in order to protect the estimated $1 billion investment it makes in every host city. After the news confirming the postponement, local organizers, sponsors and hospitality companies are likely to join the IOC in trying to recoup some of the money from insurers. However, since cancellation insurance usually includes postponement within a standard policy, the process is not going to be as easy as it sounds.
The chief executive to the Tokyo 2020 organizing committee, Toshiro Muto, said it was still not clear who would pay the extra costs. Following a meeting with Japanese Prime Minister Shinzo Abe, IOC’s chief Thomas Bach claimed that “this is about protecting lives”. Although he is undoubtedly right, it remains to be seen whether his words, besides worry, also show the lack of an actual plan.
In the meantime, though, Insurance losses are likely to be borne by Lloyd’s of London, and comes at a time when Lloyd’s has asked all its members to quantify their potential losses from the Covid-19 pandemic. Lloyd’s insurers Beazley, Hiscox and Tokio Marine Kiln usually insure major sporting events such as the Olympics.
Despite all the uncertainties, postponement insurance can indeed save money already invested, as well as additional costs related to the event’s rearrangement. It is also believed the pay-outs will be relatively smaller due to the fact that companies should still make money out of the event in 2021. Anyway, although it seems clear a postponement represents a milder scenario than a cancellation, it looks as though, in terms of impact, it is a mere reprieve for insurers.
Further Reading Suggestions