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.
Insurers could face $2.6 billion loss as 2021 postponed Olympics is “very unrealistic without COVID-19 vaccine”
23 April 2020 | Blog Post
If the postponement of the Tokyo Olympics two weeks ago was seen with certain relief, it is red alert time yet again for the insurance market. According to Professor Devi Sridhar, chair of global health scientist at the University of Edinburgh, it is “very unrealistic” the games will take place next year unless a Covid-19 vaccine has been found and tested by then.
As previously discussed in one of Russell Group recent articles, postponement costs are usually significantly lower than those in case of a full cancellation. After the announcement from the Olympic Committee (IOC) confirming the decision to delay the event until 2021, insurers were confident this could reduce the damage to the industry to about $500-650 million. However, the IOC coordination commission chair, John Coates, acknowledged Covid-19 could still affect the already rescheduled Olympics. And that was backed by Professor Sridhar, who told BBC this week that an eventual second postponement is actually very likely to happen unless an effective and affordable treatment arises. “If we do not get a scientific breakthrough, then I think that looks very unrealistic (the games actually taking place in 2021)”, she said. “I think they’ve made the right decision saying they are going to put it back a year and re-evaluate”.
This throws into sharp relief the impact the pandemic could have on mass gatherings or athlete-testing in case of a no definite cure scenario. Deciding to follow the World Health Organization, the IOC is taking Professor Sridhar’s words very seriously – especially with declaration of a nationwide state of emergency in Japan until May 6th, following the country’s worsening coronavirus outbreak. The IOC and Tokyo 2020 local organising committee announced on Thursday that they have set up a joint steering committee to deliver the event’s postponement. The President of the Tokyo 2020 committee,, Yoshiro Mori, reiterated they have been tirelessly working on creating a “structure capable of overcoming these unprecedent challenges”, and also that they are “committed to ensure stakeholders the success of the Games.”
Among all the involved parties mentioned above, the insurance market also follows the story with growing interest. Having placed an $800 million abandonment and cancellation policy with Aon, the IOC is covered by what currently is the largest single source of coverage. Jefferies analyst Philip Kett estimated that the total insured loss for cancelling the games is something between $2-2.6 billion, if local organisers, broadcast rights and travel operators are brought into the equation.
As pointed out on our previous article, however, it is still not clear whether any policies included the necessary specifications to cover Covid-19.
Numbers aside, it looks as if science could play a major role going forward. Although there are still big questions marks regarding how the post-coronavirus world will shape up, global leaders have already indicated that the lockdown will come to an end very gradually. With big social gatherings likely to be last on the list, if Professor Sridhar’s remarks really come to fruition, sports events and big leagues all around the world should pay close attention to Tokyo 2020’s case. After all, even if they are given permission to conclude their current seasons with empty stadiums, there is a high possibility that fans will only be permitted to attend live events once (and if) a cure is created. Looking from the bright side, at least sports fans have something to cheer for in the meantime.
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