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If Tokyo Olympics Canceled, Loss for Insurers Would Be ‘Mind-Blowingly’ Big

2021-01-27 14:38:57
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LONDON – Insurers face a loss of $ 2-3 billion if the Tokyo Olympics are canceled this year, representing the largest ever claim in the global event cancellation market, brokers say.

With less than six months to the start of the Games, the game will be at the top of the agenda when the International Olympic Committee (IOC) board of directors meets this week.

The Olympic body, meeting remotely, is in a similar situation to last March, when it postponed the Games for 12 months when the COVID-19 pandemic halted sport worldwide.

Much of Japan is now in a state of emergency due to a third wave of COVID-19 infections.

"TV networks, sponsors, professional sports teams, entertainers, and other organizations can all have event cancellation policies to protect their interests at the Olympics."

The IOC and the Japanese organizers were firmly convinced that another postponement is not an option. So it seems more likely that the Games would have to be canceled rather than postponed again if they were not able to take place in Tokyo this summer.

Event cancellation insurers have had a difficult year due to the pandemic, with festivals, conferences and sporting events around the world having been postponed or canceled. Realtor Howden estimates losses on COVID-19 cancellations at $ 5-6 billion.

But the cancellation of the Olympics' would be by far the biggest. Amazing, ”said Simon Henderson, an executive director at brokerage Gallagher.

"The Olympics is a World Cup, it's a tennis tournament, it's an athletics tournament. It's swimming, all in one – definitely a huge headache."

Analysts at Jefferies estimate that the Tokyo Olympics is insured for about $ 2 billion, plus another $ 600 million for hospitality.

The IOC takes about $ 800 million in protection for each Summer Games, covering most of the roughly $ 1 billion investment it makes in each host city.

In addition, the local organizing committee in Tokyo will have another policy, estimated at about $ 650 million, while broadcasters are also insured for large sums.

“TV networks, sponsors, professional sports teams, entertainers and other organizations can all have event cancellation policies to protect their interests at the Olympics,” said Leigh Ann Rossi, chief operating officer at broker NFP Sports and Entertainment Group.

Such policies will have been bought years in advance and thus would likely cover the cancellation due to infectious diseases. Cancellation policy for events closed in the past year rule out that coverage.

Many of the organizations involved in the Olympics could have claimed some costs for things like hiring sites or reprinting marketing brochures as a result of last year's delay.

Tim Thornhill, a director at Realtor Tysers, said there was "no rule of thumb" about how much of an event's total insured value could be claimed under the deferral portion of an event cancellation policy.

But brokers expect any payments made for deferment last year to be less than any cancellation payments made this year.

Lloyd & # 39; s of London insurers are among those active in the event cancellation market, along with international insurers and global reinsurers such as Munich Re and Swiss Re.

Munich Re has a $ 500 million exposure to the Tokyo Olympics, a source previously told Reuters. Munich Re declined to comment.

Swiss Re has an exposure of $ 250 million, chief financial officer John Dacey told analysts last year.

German insurer Allianz has signed an eight-year insurance agreement with the IOC that went into effect earlier this month, covering Winter and Summer Games, including the Summer Games in Paris in 2024 and Los Angeles in 2028.

Given how far in advance Olympic policies are closed, Paris will likely also be covered for postponement or cancellation due to infectious diseases, brokers said.

(Additional reporting by Tom Sims in Frankfurt and David Dolan and Jack Tarrant in Tokyo. Editing by Mark Potter)

Top photo: The Olympic symbol is being reinstalled after being removed for maintenance prior to the postponed Tokyo 2020 Olympics in the Odaiba section Tuesday December 1, 2020 in Tokyo. (AP Photo / Eugene Hoshiko)

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