The upcoming Tokyo Olympics, which will be held without fans following a recent state of emergency declaration, will likely cost reinsurers up to $400 million in payouts for ticket and hospitality refunds, according to Fitch Ratings.
That’s just 10-15% of what would have been lost had the event been canceled, as many have advocated in the wake of COVID-19’s continued impact around the world, and particularly in Japan, where just 17% of the population is fully vaccinated. If the Olympics had been canceled, it would have been the largest single-event insurance loss in history.
Fitch estimates that the total insurance coverage for the Summer Games is around $2.5 billion, with $1.4 billion taken out by the International Olympic Committee and local host committee, plus $800 million from broadcasters and another $300 million from other parties, such as individual teams, sponsors and hospitality organizations.
The losses will be felt most acutely in the reinsurance market, according to Fitch, because “high-severity exposures” are typically reinsured by the groups that handle the initial policies. That said, the losses from a fanless Games likely won’t be enough to heavily impact earnings at those reinsurers, leaving their credit ratings unaffected. Many of these companies have already set aside reserves in anticipation of potential losses, Fitch said.
The 2020 Tokyo Games, originally scheduled for last summer, were postponed a year due to the COVID-19 pandemic. Despite arguments that the event is still too dangerous to host, the IOC has forged ahead with the plans, and the Opening Ceremony is set for July 23.
Ticketing and hospitality have been particularly confusing for fans in Japan and abroad. Many tickets were already sold to people around the globe when the event was originally postponed. For most of this year the organizing committee was still planning to allow Japanese fans to attend events, but that changed last week when a new state of emergency was issued in Tokyo through Aug. 22 (the Games end Aug. 8). To add to the complications, it is still possible that fans can attend Olympic events at venues outside of Tokyo.
Olympics are typically insured (and reinsured) years in advance. The losses surrounding this event may lead to changes across the industry moving forward, Fitch said, because pandemics like the one caused by COVID have created a correlation in the market. It spurred canceled events across the globe, across many months, and the insurance pricing hadn’t previously accounted for that potential correlation.
The 2028 Summer Games, set for Los Angeles, are currently in the market, and disease and cyber security will likely be two of the major concerns for the insurance industry.