Insurance sector could fork out up to $3bn for Tokyo Olympics cancellation

The insurance sector could pay out between $2bn and $3bn for the cancellation of the impending Tokyo Olympic Games, due to begin on 23 July, according to analysis from Bloomberg Intelligence, the research division of software and media company Bloomberg.

Despite the International Olympic Committee (IOC) striving to push ahead with the postponed 2020 Olympics, it has also taken out around $800m in event cancellation insurance, with additional cover purchased by the local organising committee.

Bloomberg Intelligence believes the insured cost of cancelling the event could be in the $2bn to $3bn range, including broadcasters, sponsors, professional sports teams and hospitality.

Charles Graham, senior industry analyst at Bloomberg Intelligence, said: “Insurers and reinsurers will be on tenterhooks over the next six weeks as the Tokyo Olympics’ opening nears, with any cancellation of the already postponed 2020 event potentially costing the sector $2bn to $3bn in aggregate, based on our calculations.

“That would hit an event cancellation industry already battered by record 2020 claims.”

Strongly opposed, but…

Insurance losses could be especially large as Japan faces emergency measures to contain Covid-19 infections.

Last year, Swiss Re said that its direct Olympics exposure was $250m, which is about 1% of net earned premiums.

Munich Re hasn’t specified its exposure around the potential cancellation of the Olympics, however it could have exposure equating to hundreds of millions of euros, some of which may have been reserved.

Meanwhile, according to the latest polls, opposition in Japan to holding the Olympic Games could be easing following the number of Covid-19 cases dropping.

But medical opinion remains strongly opposed to the games taking place. Bloomberg Intelligence added that Japanese corporate sponsors favour another postponement after international spectators were excluded from attending.

The IOC is focused on making the games as safe as possible and has plans for daily testing and the vaccination of athletes - although vaccination will not be compulsory.

A decision on whether to allow spectators into venues will be taken later this month.