Insurers could lose billions if coronavirus causes Olympics cancellation
Fears persist that Games may be postponed, moved or called off because of coronavirus
Global insurers face a hefty bill if the coronavirus forces the cancellation of the Summer Olympics in Tokyo, with estimates of the cost of insuring the sporting showpiece running into the billions of dollars.
Japan has more than 200 cases of coronavirus, which has infected more than 80,000 people worldwide and killed around 2,800, mostly in China.
Japanese Prime Minister Shinzo Abe's government has ordered numerous sporting events cancelled as it tries to contain the epidemic but has pledged the Olympics will go ahead as planned starting July 24.
Japan has invested about $16 billion Cdn so far into the Games, but fears persist that they may be postponed, moved or even called off.
In an interview with The Associated Press this week, International Olympic Committee (IOC) member Dick Pound said a decision would need to be made by May.
Potential losses from cancelling an event will generally be higher the later a decision is made, said Adrian Thomas, a director at insurance broker Aon.
"If they have to cancel two, three weeks before the event start date, they have spent everything they have to spend," Thomas said.
"If you have three months to go before the event start date, they have an opportunity to save some event costs."
IOC president Thomas Bach said on a conference call with Japanese media Thursday that the committee is "fully committed" to the Tokyo Games.
The IOC takes out around $1 billion of protection for each Summer Games, which covers most of the roughly $1.3 billion investment it makes in each host city. Insurance sources estimated it would pay a premium of about two to three per cent, for a total cost of $32 million to insure the Tokyo event.
The policy will cover setbacks ranging from war to natural disasters.
Easily spread infections like coronavirus are often excluded from standard event cancellation insurance, but Alli MacLean, of Allianz Global Corporate & Specialty in London, said most large-event policyholders would purchase additional coverage.
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Allianz, the German insurance giant, has agreed with the IOC to insure the Olympics from 2021 to 2028 but not the Tokyo Games.
Local organizers, Olympics sponsors, merchandisers, hoteliers, car hire companies and travel firms also typically buy insurance, though it may not cover their full costs in the event of a coronavirus-related cancellation.
Munich Re board member Torsten Jeworrek said on Friday it was a provider of cancellation insurance for Tokyo in the hundreds of millions of euros.
He would not say whether the figure was more or less than its €250 million ($369 million Cdn) exposure from the 2018 Winter Olympics or if the policy covered coronavirus, citing confidentiality.
Jefferies analysts estimate the insured cost of the 2020 Olympics at $2.7 billion, including TV rights and sponsorship, plus more than $800 million for hospitality.
Insurance sources say policies for most major sporting events are underwritten by Lloyd's of London or the broader London commercial insurance market.
Lloyd's insurer Beazley said in an infographic that event cancellation insurance for the 2014 and 2018 soccer World Cups covered potential losses of up to $2 billion.