Tokyo Olympic Games faces potential catastrophic cancellation losses
16 June 2021
The potentially catastrophic losses if the delayed Olympic Games in Tokyo cannot take place this summer has focussed attention oncontingency and cancellation insurance for sporting and other events worldwide.
Industry experts believe the costs of cancelling the Games due to the impact of the COVID-19 pandemic would be $2 billion- $3 billion. This includes around $800 million taken out by the International Olympic Committee (IOC) in event cancellation insurance along with claims from broadcasters, sponsors, professional sports teams and hospitality.
There are reports that Olympic organisers would have to reimburse Japanese sponsors, which have invested a record $3.3bn in the event, on top of the estimated $800m they have already forfeited in ticket sales due to the ban on foreign spectators.
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.”
With the Games, which start on 23 July and run to 8 August 2021, having moved from their 2020 position in an attempt to negate the impact of the pandemic, Japan’s medical establishment is becoming increasingly nervous about bringing together 78,000 people from around the world for the Olympics and Paralympics. Organisers are planning to put 7,000 doctors, nurses and medical staff on standby for the Games, down from an initial figure of 10,000.
Organisers insist the Games can take place despite considerable opposition within Japan and according to Takahide Kiuchi, an economist at Nomura Research Institute Ltd, scrapping the Olympics could inflict a direct economic loss on the country of around 1.8 trillion yen ($16.4 billion),
The importance of the Games around the business world is highlight by the announcement in March 2020, before the pandemic forced the games to be delayed, that NBC had sold a record $1.25 billion in advertising for the Olympics.
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