Source: asiainsurancereview.com

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 billions of dollars.

Japan has more than 200 cases of coronavirus, which has infected more than 80,000 people worldwide. Prime Minister Shinzo Abe’s government has ordered numerous sporting events canceled as it tries to contain the epidemic, but has pledged the Olympics, in which Japan has invested some $12 billion, will go ahead as planned from July 24. But fears persist that the Games may be postponed, moved or even called off, a decision International Olympic Committee (IOC) member Dick Pound was reported this week as saying would need to be taken 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 2-3 weeks before the event start-date, they have spent everything they have to spend. If you have three months to go before the event start-date, they have an opportunity to save some event costs,” Thomas said.

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. Insurance sources estimated it would pay a premium of about 2-3%, giving a bill of up to $24 million to insure the Tokyo event. The policy will cover for setbacks ranging from war to natural disasters.

Easily spread diseases like coronavirus are often excluded from standard event cancellation insurance, but Alli MacLean of Allianz Global Corporate & Specialty in London said “the majority of large event policyholders would purchase communicable disease coverage”. Local organizers, Olympics sponsors, merchandizers, hoteliers, car hire companies and travel firms also typically buy insurance, though it may not cover their full costs.

Munich Re board member Torsten Jeworrek said on Friday it was a provider of cancellation insurance for Tokyo, for an amount in the hundreds of millions of euros. He would not say whether the figure was more or less than its 250 million euro exposure to the 2018 Winter Olympics or if the policy covered coronavirus, citing confidentiality.

Jefferies analysts estimate the insured cost of the 2020 Olympics at $2 billion, including TV rights and sponsorship, plus $600 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.