According to industry sources, the threat of war between Russia and Ukraine is the greatest risk for insurers offering coverage during the Beijing Winter Olympics, as an outbreak of hostilities could force team withdrawals or appearance cancellations.
The Olympic Games, as the most important sporting events on the calendar, are always a huge business opportunity as well as a major headache for the commercial insurance industry.
When the 2020 Tokyo Olympics were postponed by a year due to COVID-19, insurers paid out hundreds of millions of dollars to the local organizing committee in order to recoup costs such as rebooking hotels and sports venues, according to industry sources.
Now, with the Winter Olympics set to begin on Friday, insurers and Games organizers see a risk of athlete withdrawals due to COVID-19, and they are also watching the buildup of Russian troops, tanks, and artillery along Ukraine’s borders with increasing concern.
An outbreak of war could cause countries to withdraw their teams from the Games, which could result in teams or broadcasters filing insurance claims for payouts due to athlete non-appearance.
“When we look at Beijing, the biggest concern is political risk,” said Duncan Fraser, global practice leader sport & entertainment at insurance broker Howden.
“What insurers will be watching closely is the situation in Ukraine.”
The mosquito-borne Zika virus was a concern at the Olympic Summer Games in Rio in 2016, and war was also a concern for South Korea’s Winter Games in 2018, but both events went off without a hitch.
“The risk and insurance industries will be crossing their fingers that the (Beijing) Games go off without a hitch,” said Ben Sheppard, senior research analyst at insurance investment adviser Argenta Private Capital.
According to analysts, the Summer Olympic Games are now typically insured for up to $3 billion in total.
The International Olympic Committee (IOC) insures each Summer Games for around $800 million, though the Winter Games, which are smaller, may require less coverage, according to sources.
Other stakeholders, such as the local organizing committee, larger national Olympic committees such as the US National Olympic Committee, and broadcasters, would also purchase coverage for cancellation and risks such as riots and civil commotion.
The buildup to the Winter Olympics, which take place from February 4 to 20, has already been tense. In response to China’s human rights record, the United States and many of its allies, including the United Kingdom, Canada, Australia, Japan, and Denmark, have stated that they will not send official diplomatic delegations to the Games. The impact on insurance policies as a result of hotel and other cancellations has yet to be determined. more info
However, if Russia and Ukraine go to war, teams and broadcasters may suffer war-related losses as well, because war involving the five so-called “superpowers” of the United States, Britain, France, China, and Russia is frequently excluded from cancellation policies, according to Fraser at Howden.
Insurance companies frequently exclude coverage for risks for which they cannot pay claims.
Since the outbreak of the coronavirus pandemic two years ago, which forced the cancellation of sporting events, concerts, and conferences around the world, insurers in the event cancellation sector have been nursing losses.
This has resulted in a greater number of policy exclusions, which means that policyholders cannot make claims for issues that may result in the postponement or cancellation of events.
COVID-19
The Games take place in a “closed loop” bubble that isolates all event personnel, including athletes, from the general public.
China has reported an increase in COVID-19 infections among Olympic athletes and officials, and organizers have warned that more cases will be reported in the coming days.
Olympic cancellation and non-appearance policies are frequently taken out years in advance, leaving insurers vulnerable to losses, though newer policies will exclude COVID-19, according to Leigh Ann Rossi, chief operating officer of NFP’s Sports and Entertainment Group.
Furthermore, event cancellation insurance for COVID-19 and other communicable diseases has become nearly impossible to obtain for future Olympics.
The IOC has a sponsorship deal with German insurer Allianz until 2028, and insurance sources say Allianz will most likely be the lead insurer for the Beijing Winter Games.
An Allianz spokesperson declined to comment on contractual terms, but said the insurer was collaborating with Olympic committees and athletes on products such as fleet and property and casualty insurance, as well as new products for institutions, events, and athletes.
Previously, the Games were insured by Lloyd’s of London syndicates such as Beazley and Hiscox, and reinsured by reinsurers such as Munich Re and Swiss Re.
When asked if they would insure the Beijing Winter Olympics, Munich Re, Swiss Re, and Hiscox all declined to comment, while Beazley did not respond immediately.